Bernstein maintains price target for Lyft at $14, sites pending Q4 update
On Monday, it was reiterated by Bernstein that it is keeping its Market Perform rating on Lyft, with a steady price target of $14.00. Lyft, traded under Nasdaq, is at a crucial juncture according to the firm’s analysis, poised for a pivotal update in the upcoming fourth quarter. The newly appointed management team of Lyft is expected to reveal its long-term goals for the first time, including financial targets that could significantly influence the Lyft stock outlook.
Understanding the Competitive Landscape
Lyft’s competitive standing, particularly in comparison with Uber, is a topic of much discussion. Despite facing challenges from Uber’s scale and platform advantages, there are unique opportunities for Lyft to narrow the valuation gap. Setting realistic goals and consistently surpassing them has been a strategy that benefited Uber, and could very well be Lyft’s ticket to enhancing investor sentiment.
The Gross Margin Debate
Bernstein raises a cautionary note about the general market’s expectations around Lyft’s gross margin. Suggesting that these might be overestimated by a substantial 400 basis points, the implications for future EBITDA revisions cannot be overlooked. The firm points to insurance costs as a recurring challenge for Lyft, emphasizing the limits of reducing fixed costs as a compensation strategy.
Strategy and Growth Projections
Lyft’s strategies for the years 2023 to 2026 are anticipated with keen interest, with Bernstein predicting a low-teens compound annual growth rate (CAGR) in Gross Bookings. This forecast slightly exceeds the consensus, hinting at potential growth reaching the mid-teens. Moreover, Lyft’s recent advancements in volume and supply, coupled with the dynamic interplay between its core service and new product offerings, remain focal points of interest for investors.
Profitability and Insurance Costs
On profitability, Bernstein offers a more conservative viewpoint, projecting a mid-single-digit incremental adjusted EBITDA margin as a percentage of Gross Bookings over three years. This is notably more conservative compared to the Street’s 6.5% expectation. The analysis then narrows down to insurance costs per trip and explores strategies for Lyft to mitigate these costs effectively. Here, adjusting prices and moderating driver incentives emerge as tangible approaches for Lyft.
Conclusion
Lyft’s journey ahead is filled with both challenges and opportunities. The looming fourth quarter update presents a milestone moment for Lyft to delineate its long-term aspirations and to potentially redefine its financial trajectory. With Bernstein maintaining a solid price target for Lyft stock amidst these considerations, all eyes are on Lyft’s next moves on the Nasdaq index.
