By Michael Elkins
Shares of LYFT Inc (NASDAQ:LYFT) are up 3.31% in pre-market trading on Tuesday after KeyBanc upgraded the ride-sharing company to an Overweight rating with a $24.00 price target. Analysts said that ride-sharing data from KeyBanc’s “Key First Look” (KFL) appears stable, with Lyft data actually improving over the course of December.
When the data is layered with the aggressive cost-cutting action seen in recent quarters, and an ongoing recovery along the West Coast, the analysts see a meaningful opportunity for improvement in Lyft's EBITDA over the course of 2023. KeyBanc raised 2024 EBITDA estimates by ~2% to $848 million. This is below the 2024 target of $1 billion but above the Street's estimate of $828M.
The analysts wrote in a note, “We believe Lyft made considerable progress in reducing costs in 2H22, which has created a cushion ahead of future insurance cost increases. Thus, we believe margins can expand ~400 bps annually based on our revenue forecast. If insurance cost inflation is less severe than anticipated in 2023, then we believe there is additional upside to our forecast.”
The KFL showed material improvement in growth through 4Q, driven by q/q acceleration of indexed customer and transactions growth. The analysts view, this as a positive sign that growth has stabilized and can improve into 2023 as comps get gradually easier.