Lyft Stock Initiated Buy at Argus With $39 Target

Lyft can thrive even as it is smaller than Uber, says Argus analyst Jim Kelleher, initiating coverage of the ride-hailing company with a buy rating. Lyft's recent stock-price drop was overdone, he maintains.
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Lyft  (LYFT) - Get Report shares got a buy rating from Argus analyst Jim Kelleher, who began coverage of the country’s No. 2 ride-hailing service with a $39 price target.

At last check Lyft shares were off 3% at $29.20. The $39 target indicates 34% potential upside in the shares.

The stock has dropped 46% since Feb. 11 as the coronavirus pandemic has decimated demand for rides. 

The selloff "is overdone,” Kelleher wrote in a report. “The shares appear attractive at current levels.”

He says the North American ride-sharing market is big enough to support Lyft, its bigger competitor Uber  (UBER) - Get Report and possibly even others. 

Lyft being smaller than Uber won’t prevent the No. 2 company from thriving, Kelleher said.

“Ridesharing is not a 'winner-take-all' industry,” he wrote. “The company has also invested sufficient capital in building out its technology infrastructure.”

Morningstar analyst Ali Mogharabi also has a positive view on Lyft. 

“It has quickly emerged as the number two ride-sharing player, a position we think the firm will keep for years ahead,” he wrote in a report last month. 

“The firm has successfully gained market share going head to head against the market leader, Uber.”

Mogharabi thinks Lyft has a narrow economic moat, “thanks to the network effect around its ride-sharing platform and intangible assets associated with rider, rides, and mapping data, which we think can drive Lyft to profitability and excess returns on invested capital in the future.”

But Mogharabi does say Lyft is at a disadvantage compared to Uber during the coronavirus pandemic. That's because Uber’s revenue is more diversified. He puts the fair value for Lyft shares at $50.