Shares of Lyft Inc (NASDAQ: LYFT) rose before the opening bell Tuesday, after the stock was upgraded to positive from neutral by an analyst at Susquehanna.
In a note to investors, analyst Shyam Patil wrote: “With the US rideshare market becoming more rational, LYFT showing clear evidence of marketing and insurance cost leverage, and UBER’s IPO out of the way, this is the time to buy the stock.”
Patil went on to say to that his firm is encouraged by Lyft’s plans to bring costs down as a percentage of revenue. “Given the shorter operating history relative to Uber, we believe Lyft has ample opportunity to bring costs down as a percentage of revenue over the next several quarters,” the analyst said.
Patil raised his price target for Lyft from $57 to $80 a share. The stock, which has climbed more than 10% in the past month, rose more than 4% in premarket trading.
Investors have battered the ride-hailing company since making its market debut. Lyft is currently trading below the $87 a share it opened at on its first day of trading on March 29.
Lyft posted its first post-IPO quarterly financial results last month. Revenue was well ahead of analyst expectations, but stock-based compensation related to its public offering significantly weighed down on net loss.
The company saw revenue soar 95% to $776 million in the quarter, above Wall Street forecasts of $739 million. Adjusted for one-time items including stock-based expenses, loss per share was $9.02.
Some analysts have questioned how Lyft will become profitable without hiking prices. Such a move could be catastrophic as it’s likely to make some of its loyal customers to move to rival Uber (NYSE: UBER), which is also yet to report a profit.
Lyft Inc Profile
Lyft is the second largest ride-sharing service provider in the U.S., connecting riders and drivers over the Lyft app. Lyft has recently entered the Canadian market, in efforts to expand its market outside of the U.S.
Incorporated in 2013, Lyft offers a variety of rides via private vehicles, including traditional private rides, shared rides, and luxury ones. Besides ride-share, Lyft also has entered the bike- and scooter-share market to bring multi-modal transportation options to users.