Uber hits new highs
After closing above its May 10 IPO listing price of $45 for the first time yesterday, Uber (UBER) was up 4% today at 12:50 PM ET. The rally was, perhaps, driven by Uber’s addition into the Russell 1000 today in its annual reconstitution. Of 31 analysts covering Uber, 22 have a “buy” rating for the stock with a median target price of $53.5.
After losing 7.6% on its debut day, it took Uber almost seven weeks to end above the list price yesterday. The stock had reached above $45 in intraday trading on a couple of other occasions but never managed to end above its list price.
Lyft follows suit
After gaining 3.65% yesterday, Lyft (LYFT) was up 1.24% today at 1:01 PM ET. While Lyft is still significantly below its list price of $72, the stock is up 14% since the start of June. Of the 34 analysts covering Lyft and surveyed by Thomson Reuters, 21 have a “buy” rating while only three say “sell.” They have a median target price of $72.
Why the Russel 1000 entry led to the rally
Entry into the popular and widely followed index means a couple of things for these two stocks.
First, being in the index also means being in the portfolio of investors who follow the index as a benchmark. For example, the iShares Russel 1000 ETF (IWB) follows the Russel 1000 Index. Uber and Lyft’s entry into the index means fund managers will have to include the ride-sharing companies in their portfolio to keep the tracking error low.
Second, being included in a popular index also improves the stocks’ liquidity.