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Uber and Lyft Seen as Well-Positioned as Demand Returns

Uber and Lyft are both in the spotlight after Uber agrees to classify its U.K. drivers as workers, and Lyft makes it to Wedbush's Best Ideas list.

Ride-hailing competitors Uber  (UBER) - Get Uber Technologies, Inc. Report and Lyft  (LYFT) - Get Lyft Inc Class A Report were both in the spotlight on Wednesday after Uber agreed to classify its U.K. drivers as workers, and as Lyft made it to Wedbush Securities’ Best Ideas list with a price-target raise.

Uber on Tuesday said it will reclassify its U.K. drivers as workers, falling partly in line with a recent court ruling that will make roughly 70,000 Uber drivers entitled to an earnings guarantee, holiday pay and to automatic enrollment in a workplace pension.

The move came after Uber lost a court case last month challenging the requirements.

Lyft, meanwhile, made it onto Wedbush Securities’ Best Ideas list, with analyst Dan Ives raising his one-year price target on the ride-hailing company to $85 from $72 to reflect a stronger reopening trajectory into the second half of 2021 and 2022 as well as improved profitability, and long-term opportunities for stronger revenue per rider.

“We continue to believe the ridesharing stalwarts Uber and Lyft are well-positioned to see a springboard of consumer demand bounce back as a vaccine gets deployed to the masses by this summer and more start to return to the office and traveling rebounds significantly,” Ives wrote in a research note.

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Both Uber and Lyft have been slammed by the COVID-19 pandemic, though analysts have been upbeat about Uber’s food delivery business, which has grown during U.S. economic lockdowns. 

Lyft has experienced more of a struggle, though its stake in delivery service provider Essential Deliveries and other initiatives like car rentals, public transportation payments integration and preferred rides should position Lyft for success beyond simply being a reopening play, Ives said in his note.

“The profitability profile and leverage have essentially turned Lyft into a different company than it was pre-pandemic, as the company has significantly cut fixed/variable expenses across the board to shelter its business model during this Category 5 storm,” the analyst said.

At last check, shares of Uber were down 2.8% at $57.20. Shares of Lyft, meanwhile, were up 1.05% at $65.37. 

Elsewhere, Wall Street was looking at a moderately higher open ahead of Wednesday's decision on interest rates from the Federal Reserve and news conference.