Lyft (NASDAQ:LYFT) was cut to Sell from Neutral at MoffettNathanson on Tuesday, with analysts lowering the price target for the stock to $7 from $10 per share.
The analysts said investors should "steer clear" of the stock, and they believe investors won't like what they see if Lyft discloses its gross bookings and rides when it reports earnings.
"In 1Q19, Lyft's former management team made the important decision to no longer provide disclosures on ride volume and gross bookings. As a result, investors have been left guessing what is going on underneath the hood for ride volume, pricing, and take-rate," explained the analysts. With 4Q23 results, management is expected to provide both long-term guidance and perhaps improved disclosures on bookings and volumes."
"Will investors like what they see if management discloses gross bookings and rides? Our analysis of non-traditional data points suggests not, and any potential historic financials will reveal the unsustainable take-rate tactics used by past management to drive revenue," they added.
MoffettNathanson's financial assessment of the strategic repair management will undergo is "grim," said the analysts, adding that when it comes to raising prices, Lyft is beholden to its more scaled, better-funded, and more profitable peer, Uber (NYSE:UBER).
"With take-rate and pricing no longer a meaningful lever to pull and rising insurance costs per ride, we expect Lyft’s gross margins to compress from 50.8% in FY21 to 38.5% in 2024E, with declines continuing in 2025 & 2026 as insurance cost growth outpaces pricing growth," wrote the analysts.