Lyft Is 'Extremely Compelling at Current Levels' Says J.P. Morgan

Analysts at J.P. Morgan reiterate their overweight rating and $85 price target on Lyft.
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Shares of ride-hailing service Lyft  (LYFT) - Get Report were rising Wednesday after analysts at J.P. Morgan reiterated their overweight rating with an $85 price target because of the company’s strong fundamentals.

The “ongoing rationalization in U.S. rideshare,” solid growth in both active riders and revenue per active rider, headroom to drive insurance efficiencies, and a clear path to profitability in 2021 are all reasons for their reiteration on the stock, said analyst Doug Anmuth.

“Importantly, while there has been considerable concern around the impact of Covid-19, Lyft stated (Tuesday) at an investor conference that US&C rideshare remains strong, is less impacted than other areas, & management reaffirmed its 1Q outlook,” Anmuth wrote.

While the coronavirus has forced numerous companies to reevaluate their quarterly projections, the virus doesn't seem to have an impact on ride-sharing. In fact, Anmuth said that ride-sharing could increase as people become more leery of taking public transportation.

J.P. Morgan is mainly bullish on shares of Lyft because the valuation is underappreciated as the stock currently trades at below two times 2020 estimated revenue, making the stock “extremely compelling at current levels.” The firm expects Lyft to end 2020 with at least 20% revenue growth in the fourth quarter.

“Lyft will focus on high value riders through key initiatives like the newly piloted Lyft Preferred (top rated driver in a newer, more spacious car) & Chase Sapphire integration for Lyft Pink,” in order to reach those growth estimates, Anmuth wrote.

The firm sees Lyft as one of its top small to mid-cap ideas in 2020. The stock also is on J.P. Morgan’s Analyst Focus List. 

Lyft shares rose 1.95% to $37.69 on Wednesday.