On the final trading day of the first quarter, American ride-hailing company Lyft (LYFT) made its debut on the NASDAQ (QQQ). The company received an overwhelming response from investors for its IPO, which was oversubscribed “just two days into its investor roadshow,” Reuters reported.
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Lyft stock falls below its IPO price
On March 29, the first trading day for Lyft, its stock opened at $86.69—up over 20% from its IPO price of $72.00 per share—before settling for the session at $78.29. Investors’ optimism about the company seems to be fizzling out much sooner than expected, as the stock fell to $69.17 on April 1, down 11.6% from its March 29 closing price and nearly 4% from its IPO price.
What could be driving this pessimism?
Wall Street analysts surveyed by Reuters don’t expect Lyft to become profitable anytime soon—not even in 2021. According to these estimates, the company’s net income is expected to improve to ~-$889 million in 2021 from -$911 million in 2018.
However, there’s more to today’s massive sell-off in Lyft stock than these estimates. According to Thomson Reuters, popular financial services company Guggenheim Partners started its coverage on Lyft earlier today with a “neutral” recommendation. Guggenheim’s neutral rating is likely to hurt the sentiments of investors who were highly optimistic about Lyft’s future growth potential as reflected in its March 29 stock price rally. Weaker sentiments could be one of the key factors driving Lyft stock down today.