Lyft stock forecast: Will ride-hailing app recover from plunge?
Lyft (LYFT) is in the midst of a heavy downturn. It’s being battered by wider stock market bearishness and macroeconomic factors, including driver and fuel costs that are hurting the bottom line.
As the wider economic environment braces for a downturn, can Lyft ride out the storm and emerge in more forgiving, demand-softened conditions? The latest Lyft share price forecast suggests the current selloff may be reactionary.
Post-IPO Lyft stock analysis
Following its initial public offering (IPO) in March 2019, priced at $72 a share, Lyft has struggled to hold onto its initial valuation. The stock endured an initial downturn before a rally in a wider bull market in late 2020 and early 2021, kick started by strong earnings.
Lyft has been enduring a downturn since reaching a peak last year as investors move away from companies dependent on cost-sensitive elements, like driver numbers and fuel costs. The Lyft stock chart enjoyed growth through early 2021 as it ate into Uber’s (UBER) market share, its share price peaking at $66.56 on 19 March 2021.
Following the announcement of disappointing earnings, Lyft’s share price declined.
The stock dropped heavily through May last year as the company posted heavy Covid-related losses.
Shares plunged the day following the announcement of first-quarter results, diving from $30.76 on open to $22.43 by close – a 29.91% fall. After a brief resurgence the next day, shares fell a further 6.9% on 6 May.
The stock fell a further 9.3% by close on 9 May, as seen on the Lyft stock chart above, with the price hitting $18.61, for a market capitalization of $6.49bn.
Technical analysis for the stock at the time of writing (11 May) showed the stock trading below its 10 and 20-day moving averages, indicating a bear trend.
Meanwhile, a relative strength index (RSI) reading of 19.33 was signalling overbought territory. A reading of 30 and below typically means that the asset is undervalued.
Is Lyft a good stock to buy?
Lyft has been saddled with numerous price obstacles as different macroeconomic pressures increased the cost of doing business.
Labour shortages that gripped the US during the “Great Resignation” – where jobs that factor in fluctuating consumer demand, like Lyft – have seen wages soar.
“People can drive for Uber or Lyft, work 20 hours a week and make $60,000 a year,” Lindsay Hansel, president of US-headquartered First Class Recruiting, told Capital.com in an interview in January.
Uber struck a deal on 24 March 2022 with NYC Taxis, to list the yellow cabs on its app to combat low driver supply. Lyft spent nearly $1bn on driver incentives in 2021 to entice more workers to join its fleet.
These pressures are unlikely to abate soon. Soaring fuel prices have also put pressure on the company’s bottom line.
According to the latest news from the Automobile Association of America (AAA), fuel prices in the US have soared in the last year as demand rebounds from pandemic lows, supply chains become squeezed and Russia’s invasion of Ukraine puts the brakes on a major source of energy. The auto association said average prices were $4.37 on 9 May 2022, compared with $2.97 a year earlier.
Rising prices at the pumps could add to Lyft’s woes both directly, if the number of profitable trips drops, and indirectly, if drivers are put off getting behind the wheel.
“The labour crunch has turned from a headache into a severe migraine for Lyft as it faces an uphill battle in the big fight to attract drivers back into its ranks,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said in a note.
“As demand for ride hailing services fell off a cliff during the pandemic, some of its most reliable recruits got out from behind the wheel and found new positions in other sectors. With hospitality also starved of staff as the economy re-opened it’s become tough to attract drivers back without the lure of bigger incentives.”
She added: “Instead of being seen as a nimble player using tech efficiencies to streamline costs, Lyft is being weighed down by real world labour costs and that’s why its shares have careered down the hill.”
Ongoing fight within ride-hailing duopoly
Ride-sharing apps were at the forefront of a bold new frontier for tech giants when they burst on the scene, with Uber leading the way with loss-making practices under the promise of future profits.
Lyft, founded three years after market-leading Uber, has been making in-roads into what is now a fairly uneven duopoly, with the pair making up almost the entirety of the ride-hailing market, according to Bloomberg’s Second Measure.
The company made up 29% of the ride-hailing market in March 2022, versus 71% for Uber, compared with 22% versus 74% in September 2017.
Investors appear nervous that Lyft, with renewed investment in driver incentives, has now been forced to take steps that will cut short its fight for increased market share.
More successful diversification
Other analysts may be drawn closer to Uber by the company’s improved diversification record. Uber’s profitability had been dragged down by its food delivery service, Uber Eats – the service continues to cut its losses.
Lyft, meanwhile, hasn’t ventured into the delivery business, while Lyft Scooter, its electric scooter arm, has so far failed to cut into the market share of leaders like Bird, Lime and Spin.
Lyft’s latest earnings
Lyft’s latest earnings, released on 3 May 2022, drove the huge selloff in the company’s shares, mainly under fears that driver incentives would need to rise to keep up with the stubbornly competitive labour market, even while revenues beat expectations.
Revenues were $875.6m for the first quarter of 2022, a 44% increase on Q1 2021. This was above expected revenue of $846m, according to Refinitiv.
Likewise, earnings per share (EPS) of $0.07 versus an expected loss of $0.07 beat analysts’ views. The group’s adjusted EBITDA of $54.8mn was a $127.8m improvement on losses in the same quarter last year.
Revenue per active rider also beat expectations, at $49.18 against an expected $47.07, based on data from StreetAccount.
But it was on the cost side that Lyft looks likely to continue to suffer. The company struggled to add drivers to its roster, with 17.8 million active users in Q1 2022, falling short of market expectations of 17.9 million, according to FactSet. While 31.9% higher than Q1 2021 rates, it did represent a 4.9% drop on the quarter prior.
That prompted analysts to focus on the driver-side of operations in Lyft’s Q1 2022 earnings call. The response was a pledge to continue to spend on incentives to attract more drivers, adding to steep costs.
Lyft CFO Elaine Paul told analysts on the earnings call that the company expected revenues between $950m and $1bn in Q2 2022, around expectations of $995m.
Lyft stock forecast 2022 - 2025
According to the latest outlook, analysts are not investing much weight in the recent fall in Lyft’s stock. Based on the opinion of 26 analysts compiled by MarketBeat, the stock had a 169.71% upside for an average Lyft stock price target of $50.19 at the time of writing (10 May).
The Lyft stock predictions ranged from the high of $78 to the low of $25. The consensus recommendation was a ‘buy’, with 17 analysts rating a ‘buy’ and nine analysts a ‘hold’.
Every analyst providing an outlook downgraded their Lyft stock price prediction in the wake of earnings and the stock price fall, but none predicted a price lower than Lyft’s current position, indicating the stock may be relatively undervalued.
Susquehanna predicted the biggest downside following earnings, downgrading from a price target of $54 to $25 in a neutral rating, with 19% downside on report day of 4 May 2022. Deutsche Bank downgraded from $43 to $28..
Royal Bank of Canada and Canaccord Group were most optimistic, offering one-year price targets of $42 and $52, respectively.
According to algorithm-based forecaster Panda Forecast, Lyft’s share price is expected to rebound over the medium term, reaching $37.88 in December 2023, before falling to $24.95 in December 2025 and $18.10 by the end of 2026.
In 2027, the Lyft stock price is forecast to fall to $16.78, before rising to $27.70 by 2030 and $30.61 by 2032.
Note that analyst and algorithm-based Lyft stock projections can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence. And never invest or trade money you cannot afford to lose.
FAQs
Will Lyft stock go up?
Based on 26 analysts’ projections as of 10 May, Lyft stock was expected to rise to an average price target of $50.19. The price targets varied from a low of $25 to a high of $78. Note that analysts’ predictions can be wrong and shouldn’t substitute your own research.
Is Lyft stock buy, sell or hold?
Lyft stock was rated as ‘buy’ according to the data compiled by MarketBeat, with 17 analysts rating it as a ‘buy’ and nine a ‘hold’. Note that analyst predictions can be wrong and shouldn’t substitute your own research.
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