The bank calls the ride-hailing startup a top internet pick—comparing Lyft (ticker: LYFT) to the likes of
(MTCH). Analyst Doug Anmuth has an $85 price target for the shares, up about 100% from recent levels.
Anmuth covers internet stocks. Besides Lyft, his other top picks are
(FB), Amazon, and
(NFLX). (The list reminds Barron’s of the old Sesame Street game: Which one of these things doesn’t belong?)
Of course, Lyft is a platform-technology company. It offers more services than just ride-hailing. Consumers can access scooters and see public transit options on its mobile app. Lyft peer
(UBER) also offers delivery services and is trying to disrupt the truck brokerage business, the turf of firms such as
C.H. Robinson Worldwide
Still, as the move into truck brokerage illustrates, Lyft and Uber are transportation companies. Lyft, for instance, partners with auto parts suppliers such as
(APTV). Traditional car makers such as
(F) are trying to beat them to the punch of delivering on-demand, driverless transportation, investing in robotaxi services or new mobility options of their own.
“Lyft reported significantly better than expected revenue and [operating earnings], as it continues to take share of an increasingly rational U.S. ride-share market,” wrote Anmuth in a Friday research report reviewing third-quarter earnings for his coverage list. He is focused on Lyft’s path to profitability.
That’s sensible. Still, his other big takeaways from third-quarter earnings are a little jarring—at least for automotive investors. He says cloud computing is getting more competitive and that changes to how Google search operates are affecting companies such as
Anmuth isn’t alone in liking Lyft stock. About two-thirds of analysts covering the company rate shares the equivalent of Buy, better than the 55% average for stocks in the
Dow Jones Industrial Average.
Lyft is a consensus Buy on Wall Street.
But there is a stark divide. Tech analysts akin to Anmuth love Lyft and car analysts don’t.
More than 70% of the internet or technology analysts Barron’s identified rate Lyft shares at Buy. We could only find one car analyst who is that upbeat about the stock. The rest rate it the equivalent of Hold or Sell. (There are about twice as many tech analysts as car analysts following the stock.)
Investors researching stocks with disruptive technologies should be aware of this dynamic. The electric-vehicle maker
(TSLA) is another example. For the most part, tech analysts like Tesla stock and car people don’t.
Technology analysts are far more comfortable with companies that have high growth rates and bottom-line losses. Car analysts, on the other hand, are used to looking at brutal competition and earnings volatility derived from the business cycle.
In the long run, for Anmuth’s bullish call to be correct. Lyft will have to demonstrate an ability to generate much smaller losses—and even profits in coming quarters. Profits, however, have been a challenge for the ride-hailers. Wall Street consensus estimates don’t indicate that Lyft will earn a net profit in any quarter through 2021.
Lyft shares have fallen about 41% since their late-March initial public offering, priced at $72 a share. The
for comparison, is up about 8.6% over the same span.
Write to Al Root at email@example.com