On Monday, Lyft Inc. (NASDAQ:LYFT), currently trading at $11.16 with analyst targets ranging from $10 to $26, maintained its Neutral rating and a $14.00 price target from analysts at Cantor Fitzgerald following its recent acquisition announcement. According to InvestingPro analysis, Lyft appears undervalued based on its Fair Value assessment. On Wednesday, April 16, Lyft disclosed its strategic purchase of FreeNow, a European ride-hailing service, from the BMW (ETR:BMWG) Group and Mercedes-Benz (OTC:MBGAF) at an approximate cost of $197 million. The transaction is slated for completion in the second half of 2025.
FreeNow, which reported over 1 billion EUR in bookings, with close to 80% stemming from taxi services, achieved EBITDA profitability in 2024. This acquisition marks Lyft’s foray into the European market, which analysts at Cantor Fitzgerald consider a positive development for the company’s expansion strategy. This aligns with Lyft’s strong revenue growth of 31.39% over the last twelve months and its positive free cash flow yield of 16%.
Lyft’s shares saw a notable performance, outpacing the Nasdaq by three percentage points in response to the news of the acquisition. The move signifies Lyft’s ambition to diversify and grow its operations internationally.
However, the expansion into Europe won’t be without its challenges. Lyft is expected to encounter stiff competition from established ride-hailing companies already operating in the market. The competition landscape could influence Lyft’s future market performance and growth trajectory in the European sector. For deeper insights into Lyft’s competitive position and growth prospects, InvestingPro subscribers can access 12 additional ProTips and comprehensive financial analysis in the Pro Research Report.
The acquisition of FreeNow aligns with Lyft’s efforts to broaden its global footprint. With the deal anticipated to conclude in the latter half of 2025, the company is poised to leverage FreeNow’s established presence and profitability in the European ride-hailing market. Despite this strategic move, Cantor Fitzgerald’s analysts maintain their stance on Lyft’s stock, awaiting further developments post-acquisition. The company’s financial health shows promise, with more cash than debt on its balance sheet and analysts expecting profitability this year.
In other recent news, Lyft has announced its acquisition of FREENOW, a European online taxi and rideshare platform, for $197 million in cash. This strategic move is expected to double Lyft’s addressable market from approximately 161 billion personal trips per year to over 300 billion, marking a significant expansion into the European market. Analysts from firms like Bernstein, DA Davidson, KeyBanc, BMO Capital Markets, and BTIG have maintained their neutral ratings on Lyft’s stock, with a consistent price target of $15.00. The acquisition is anticipated to enhance Lyft’s annualized gross bookings and potentially increase its strategic value with key partners, despite concerns about the costs associated with scaling in competitive markets.
FREENOW operates in more than 150 cities across nine European countries and holds a relatively small market share in regions like Italy and Greece. Analysts have noted that the acquisition could provide Lyft with a diversified offering, appealing to a broader customer base and enhancing its value proposition. However, they also highlight the competitive pressure from established players like Uber (NYSE:UBER) and Bolt in the European market. Additionally, activist shareholders Engine Capital have expressed their intention to nominate two directors to Lyft’s Board, indicating heightened interest in the company’s governance and strategic direction.
Despite the opportunities presented by the acquisition, challenges remain, such as meeting three-year booking growth ambitions and managing insurance cost inflation. The transaction is expected to finalize in the second half of 2025, and analysts are cautious, waiting for the acquisition’s completion before updating their financial models. Lyft’s expansion into Europe is part of its broader strategy to increase market share and profitability in the competitive ride-sharing industry.
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