Lyft's Stock Gets a New Buy Call From One of the Few Remaining Bears

Shares of Lyft Inc. experienced a decline after an initial surge, spurred by a bullish shift from one of the last bearish analysts on Wall Street.

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BofA Securities analyst Michael McGovern significantly upgraded his rating on Lyft’s stock, moving it from underperform to buy, and increased his price target by 33%, from $15 to $20.

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McGovern’s optimism stemmed from Lyft's 2027 targets for bookings, free cash flow, and adjusted profitability, which were presented during the company’s investor day on Thursday and exceeded expectations. Crucially, the outlook indicated that competitive pressures were not expected to worsen significantly.

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Following McGovern’s double upgrade, Lyft’s stock (LYFT) surged as much as 7.1% shortly after the market opened, although it later pared those gains to finish up 0.5% in the afternoon. This mirrored Thursday's performance, when the stock initially jumped 11.3% after the investor day began at 9 a.m. Eastern time, before retreating to close with a 1% gain.

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McGovern noted that Lyft's growth projections for bookings were comparable to those of its main competitor, Uber Technologies Inc. (UBER), and did not assume any market share gains or increased competitive intensity.

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He was also encouraged by the company's positive regulatory updates, particularly regarding the classification of drivers as employees versus independent contractors. He highlighted expected favorable outcomes in Massachusetts and California, the latter concerning the Prop 22 appeal.

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Additionally, Robert Mollins of Gordon Haskett also upgraded Lyft to buy from hold, citing the current investor skepticism about the company’s financial targets as an appealing entry point. He argued that the modest 1% increase in Lyft’s shares, despite anticipated upward revisions to consensus estimates, suggested investors were undervaluing the company's potential to meet its targets, presenting a low-cost, high-reward opportunity.

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Lyft’s stock has risen 5.1% year to date, in contrast to rival Uber's 13% increase and the S&P 500 index’s 12.3% gain. This divergence highlights varying investor confidence in the ride-hailing companies and the broader market.

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In summary, Lyft's shares experienced significant early gains on Friday following an upgrade from BofA Securities analyst Michael McGovern, who cited promising long-term targets and stable competitive conditions. This optimism was further supported by Robert Mollins of Gordon Haskett, who upgraded his rating based on perceived undervaluation by investors.

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Despite the strong initial response, the stock's performance was tempered as the day progressed, reflecting cautious market sentiment. Nonetheless, these upgrades and positive outlooks suggest a potentially favorable trajectory for Lyft moving forward, particularly if the company can meet or exceed its ambitious financial targets.

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