On Monday, Wells Fargo updated its stance on Lyft Inc (NASDAQ:LYFT), increasing the shares price target to $18.00 from the previous $15.00 while maintaining an Equal Weight rating. The adjustment comes in response to anticipated industry price movements and a revised earnings forecast for the ridesharing company.
The firm anticipates a $0.60 average price per share (ASP) increase for Lyft's rideshare service in the second quarter of 2024. It is expected that half of this increase will be passed on to drivers, leading to an enhancement of $0.30 in net revenue per rideshare ride. Consequently, the take-rate is projected to grow by 90 basis points quarter over quarter.
Wells Fargo is also holding on to its previous forecast of a 5% year-over-year increase in insurance rates for the fourth quarter of 2024. However, the firm has adopted a more cautious outlook, awaiting additional data points to further inform their projections.
The new price target of $18 is based on these higher estimates and implies a steady multiple of 12.0 times the projected 2025 EBITDA of $591 million. This revision reflects the firm's confidence in Lyft's ability to increase profitability through strategic pricing adjustments and effective cost management in the coming years.
InvestingPro Insights
Lyft Inc (NASDAQ:LYFT) has been under the spotlight with Wells Fargo's updated price target, and to complement this analysis, InvestingPro data and tips provide additional context for investors. With a market capitalization of $7.13 billion, Lyft shows a significant presence in the ridesharing market. Despite a negative P/E ratio of -20.20, which reflects the company's current lack of profitability, revenue growth has been positive, with a 7.53% increase over the last twelve months as of Q4 2023.
InvestingPro Tips highlight that Lyft holds more cash than debt on its balance sheet, which can be a sign of financial stability. Additionally, analysts are optimistic, predicting that the company will become profitable this year. This aligns with Wells Fargo's expectation of increased profitability through pricing adjustments. However, potential investors should note that the company's stock price movements have been quite volatile, and it currently trades at a high Price/Book multiple of 13.17.
For investors looking to delve deeper into Lyft's financial health and stock performance, there are 11 additional InvestingPro Tips available at Investing.com/pro/LYFT. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which can provide more comprehensive insights into Lyft's market position and future potential.
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