Lyft's stock gets a new 'buy' call from one of the last bearish holdouts

By Tomi Kilgore

The stock ticks higher but once again fails to hold early gains

Shares of Lyft Inc. pulled back Friday following a nice boost early in the day that came after one of the last remaining bears on Wall Street swung to bullish.

BofA Securities analyst Michael McGovern double-upgraded the ride-hailing company's stock to buy from underperform and boosted his price target by 33%, to $20 from $15.

McGovern said the 2027 targets for booking, free cash flow and adjusted profitability that Lyft provided during its investor day on Thursday were above expectations. Perhaps more important, the outlook suggested that competition wasn't expected to get much worse.

Read: Lyft offers up 'long-awaited' long-term forecast - and this key metric could hit $25 billion, analysts say

The stock (LYFT) rallied as much as 7.1% just after the opening bell in the wake of the double upgrade, before paring gains to be up 0.5% in afternoon trading.

That followed similar action on Thursday, when the stock shot up as much as 11.3% soon after the open - the investor day kicked off at 9 a.m. Eastern time - before pulling back to close up 1%.

BofA's McGovern said Lyft's growth outlook for bookings was largely in line with that of rival Uber Technologies Inc. (UBER) and didn't assume "any share gains, or increasing level of competitive intensity."

He was also upbeat about how the company played down regulatory concerns over whether its drivers should be classified as employees or independent contractors.

"[Management] gave positive regulatory updates with decision in Massachusetts expected this summer, and the Prop 22 appeal in California reportedly likely favoring the gig-companies," McGovern wrote in a note to clients.

Also read: Investors in Uber and other gig companies could be hoping for a Trump win in November. Here's why.

With McGovern's upgrade, there is only one analyst who is now bearish among the 42 who cover Lyft. Thirteen including McGovern are bullish, while 28 are neutral.

Gordon Haskett's Robert Mollins also turned bullish on Friday. He believes investor "skepticism" surrounding the company's financial targets provides an attractive entry point for investors and therefore upgraded the stock to buy after being at hold for the past 16 months.

"With Lyft's shares increasing just 1% ... on the back of what we expected will be solid upward revisions to consensus estimates, we believe investors are discounting Lyft's ability to achieve the targets and see the shares offering a low-cost, high reward option," Mollins wrote.

Lyft's stock has gained 5.1% year to date, while shares of rival Uber have rallied 13% and the S&P 500 index SPX has advanced 12.3%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-07-24 1503ET

Copyright (c) 2024 Dow Jones & Company, Inc.