On Monday, Evercore ISI maintained its In Line rating and a $17.00 price target for shares of Lyft (NASDAQ:LYFT). The firm's position comes in anticipation of the company's third-quarter earnings, which are expected to modestly surpass Wall Street's expectations. According to Evercore ISI, Lyft is likely to achieve a "Beat & Bracket" outcome for its third-quarter earnings per share (EPS).
The firm's analysis suggests that the consensus estimates of $4.07 billion in Gross Bookings, marking a year-over-year increase of 15%, and $1.44 billion in Revenue, a 25% increase from the previous year, are reasonable. The expected EBITDA stands at $94 million, which would represent a 2.3% margin as a percentage of Gross Bookings. These projections are informed by intra-quarter data points and model sensitivity analysis.
Evercore ISI also provided insights into the broader ridesharing industry, noting that Lyft's competitor, Uber (NYSE:UBER), has faced challenges such as rising insurance costs and a slowdown in Mobility bookings for the fourth quarter. Additionally, the firm highlighted the competitive pressure from Waymo in San Francisco, a key market for Lyft, where Waymo has captured a significant share of the market.
Looking ahead to the fourth quarter, Evercore ISI believes that the Street's expectations of a sequential 4% increase in Gross Bookings and a 2% increase in Revenue, compared to a historical average of 6% quarter-over-quarter growth in 2023, are attainable. The forecasted EBITDA for the fourth quarter is $85 million, with a 2.0% margin.
The firm concluded that while Lyft's current valuation is seen as reasonable, the key factor for the company moving forward will be its ability to enhance profitability. Evercore ISI expressed interest in witnessing ongoing positive fundamental trends into 2025 before adopting a more positive stance on Lyft shares.
In other recent news, Lyft has been faced with a lawsuit filed by the U.S. government. The legal action alleges deceptive advertising practices by Lyft, accusing the company of overstating potential earnings for its drivers. In addition, the U.S. Supreme Court rejected an appeal by Lyft and Uber, allowing California to continue lawsuits claiming the companies misclassified drivers as independent contractors. On a different note, Lyft has renewed its commercial insurance partnership with Mobilitas Insurance Companies, which has been in place since 2020 and now covers operations in 23 states.
Turning to financial analysis, TD Cowen has raised its Lyft stock target and maintained a Hold rating. The firm projects a 26% year-over-year revenue increase for Lyft's third quarter of 2024, anticipating revenues of around $1.46 billion. EBITDA forecasts for Lyft are set at $93.2 million, slightly higher than the consensus estimate. Meanwhile, Wolfe Research has maintained its Peerperform rating on Lyft shares, expressing concerns about Lyft's competitive positioning against Uber.
InvestingPro Insights
As Lyft prepares to release its third-quarter earnings, InvestingPro data provides additional context to Evercore ISI's analysis. Lyft's revenue growth has been robust, with a 19.88% increase over the last twelve months and an impressive 40.64% growth in the most recent quarter. This aligns with Evercore's projection of a 25% year-over-year revenue increase for Q3.
Despite the revenue growth, Lyft's profitability remains a concern, as highlighted by Evercore ISI. InvestingPro Tips indicate that Lyft is not profitable over the last twelve months, with an adjusted operating income of -$190.51 million. However, there's a silver lining: analysts anticipate that Lyft will become profitable this year, which could be a turning point for the company's financial performance.
The market seems to be recognizing Lyft's potential, with the stock showing a strong return of 23.44% over the last three months. This positive momentum could be influenced by expectations of improved profitability and continued revenue growth.
For investors seeking a deeper understanding of Lyft's financial position, InvestingPro offers 10 additional tips, providing a comprehensive view of the company's prospects and challenges in the competitive ridesharing market.
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