A major sell-off in Lyft (LYFT) stock was expected after its lock-in period ended on August 19. After this date, insiders, including management, employees, and pre-IPO investors, are allowed to dispose of their stock. However, the stock fell just 1.5% on Monday.
Lyft had initially set the lock-in expiration for September 24. However, the company disclosed on August 7 that it had preponed the expiration to August 19. The company moved the date because the original one fell within its quarterly blackout period, during which stock cannot be traded.
Why investors are optimistic
Lyft’s recent performance seems to have impressed investors. In the second quarter, its revenue grew 72% YoY (year-over-year) to $867.3 million, driven by its active rider count rising 41%. The company’s adjusted loss per share was $0.68.
Lyft beat analysts’ expected revenue of $809.27 million and adjusted loss per share of $1.74. The company also raised its guidance based on improved market conditions and sales and marketing efficiencies. This year, it expects its revenue to grow 61%–62% to $3.47 billion–$3.5 billion. The company had previously expected 52%–53% revenue growth.
Lyft now expects an adjusted EBITDA loss of $850 million–$875 million this year, better than its previous EBITDA loss forecast of $1.15 billion–$1.175 billion.
Unlike Lyft, Uber (UBER) disappointed investors with its second-quarter results. During the quarter, its revenue rose 14% to $3.17 billion. However, its loss per share worsened YoY, to $4.72 from $2.01. The company missed analysts’ forecast of sales of $3.36 billion and an adjusted loss per share of $3.12.
Do analysts see upside in Lyft stock?
Most analysts covering Lyft are bullish about the stock. As of yesterday, 21 (60%) of 35 analysts recommend “buy,” two recommend “sell,” and 12 recommend “hold.” Several analysts raised their price target for Lyft stock following the company’s strong second-quarter results. On August 8, Wedbush upgraded its rating for Lyft stock to “outperform” from “neutral,” and raised its price target to $75 from $67. Other price target increases for Lyft stock include:
- D.A. Davidson: $74 from $72
- SunTrust Robinson Humphrey: $75 from $68
- Evercore ISI: $81 from $74
- Credit Suisse: $96 from $95
- Piper Jaffray: $79 from $78
- Cowen: $84 from $78
- RBC: $76 from $72
- Canaccord Genuity: $78 from $75
In contrast, the Zephirin Group lowered its price target to $91 from $97.
As of yesterday, Lyft stock was 34.4% lower than its IPO price in March. Analysts’ average price target of $75.13 for Lyft stock implies an upside of about 46%.
In comparison, Uber stock has fallen 18.2% since its May IPO. Most (21, or 62%) of the 34 analysts covering Uber recommend “buy.” Meanwhile, 12 recommend “hold” and one recommends “sell.” Their 12-month target of $51.47 for Uber stock implies an upside of about 51%.
Investors are anxious about Lyft and Uber turning profitable, given the rising competition in the ridesharing space. Lyft considers 2019 to be its peak investment year. In Lyft’s second-quarter conference call, CFO Brian Roberts indicated that the company expects its adjusted EBITDA loss to shrink YoY in 2020.