Lyft is quickly become one of the most anticipated IPO’s in the first half of 2019 and is expected to have a total market valuation between $20 billion to $25 billion, making it one of the largest tech IPO’s in quite a few years. Recently, a Wall Street analyst has gone on to give the company it’s first “buy” rating ahead of next weeks expected IPO in a move that further reinforces the excitement surrounding the stocks listing on the NASDAQ.
“Our LYFT valuation framework assumes the company achieves ~31% bookings share of this opportunity by 2029 (vs. an estimated 15% share today),” wrote D.A. Davidson analyst Tom White in a note to his clients according to MarketWatch. “Near-term, LYFT’s ability to reduce incentives for drivers and riders (critical tools for creating balance in its ride-sharing marketplace) will be a key lever to its near-term profitability outlook.”
White went on to say that asides from his buy rating, he puts his target price at $75 per share or a 10 percent premium from the IPO’s share price range of between $62 to $68. However, it wouldn’t be surprising if share prices surged well above the analysts’ predictions as markets are already enthusiastic at getting a piece of what will be a hotly traded stock for many weeks after listing on the NASDAQ under the ticker symbol LYFT.
“We believe this is much more significant than a taxi-substitute, that transportation will become a service for many consumers (if not most) and that transportation networks will become increasingly automated in the future,” wrote MKM Partners analyst Rob Sanderson last week, another analyst who felt optimistic about both the company’s short term stock price as well as it’s long-term business model. He said that he felt Lyft “is one of the most significant listings for the internet sector and will be looked to as a barometer for risk appetite and the IPO pipeline.”
“Are Lyft’s gains more one-time, with Uber’s scale and brand power set to normalize recent share dynamics, or will momentum continue for the founder-led platform against professional management hired to clean up a mess?” he added. “Differing strategy on geographic expansion and adjacencies is important, but we think strategy and execution toward an autonomous fleet will be a more critical success factor over the long term.”
The general consensus in the financial community is that the main risk for Lyft is whether the company can remain profitable while remaining in second place in the ride-sharing market, behind Uber. Unlike its competitor, whose losses are shrinking, Lyft has increased in loses over the past year, recording almost $1 billion in losses in comparison to the $708 million reported in 2018.
Other risks for the company include regulations. Ever since ride-sharing first came on the scene, companies are trying to catch up to policies and regulations concerning rider safety and driver classification. Additionally, ride-sharing companies are insistent on treating their drivers as independent contractors rather than employees, which would have to receive benefits. However, things are looking pretty good for the company as investors remain optimistic that the company will do well in the future.