By Senad Karaahmetovic
Shares of Lyft (NASDAQ:LYFT) are down 4.5% today after RBC analysts downgraded to Sector Perform from Outperform, citing “structural headwinds.”
Their two key factors behind the downgrade and much lower PT are concerns about driver supply and margin targets limiting the company’s ability to regain market share “beyond geographic reversion.”
First, the U.S. driver supply analysis yielded incrementally negative results. In this aspect, the analysts highlighted four particular headwinds:
- Directionally worse pick-up times for LYFT reinforcing the view of Uber's (NYSE:UBER) structural supply advantage,
- UBER seeing shorter pick-up times for the first time since May '21 could be incremental conversion headwind for LYFT,
- UBER's cheaper price getting cheaper vs. LYFT also adds to potential conversion headwinds (albeit small) and
- LA remains the potential canary in the coal mine given LYFT's outsized west coast exposure and UBER continuing to outperform on supply improvements in LA.
Second, the fact that Lyft’s management committed to working towards profitability could be an issue amid the rising competitive intensity.
“3p data and the company's revenue volumes continue to suggest at least some marginal share loss, we'd expect the multiple to be flat to down from current levels in spite of its already somewhat anemic levels,” the analysts wrote in a client note.
They also slashed the price target to $16 per share, from the prior $30.