On Monday, RBC Capital Markets revised its outlook on Lyft Inc. (NASDAQ:LYFT), elevating the company's stock from Sector Perform to Outperform. Accompanying this upgrade, the firm also increased the price target to $23.00 for the shares, up from the previous $17.00.
The upgrade comes as RBC Capital's analysis suggests a more stable outlook for the U.S. ride-hailing market, indicating that it operates as a duopoly. This perspective is consistent with findings from the firm's recent earnings analysis.
The analyst expressed greater confidence in Lyft's earnings before interest, taxes, depreciation, and amortization (EBITDA) projections for 2024. The new estimates take into account costs related to insurance and driver incentives, which are now adequately factored into the company's financial model.
RBC Capital also noted Lyft's improving competitive stance, which could potentially lead to partnerships in other sectors such as food delivery. While the firm acknowledged that a partnership with DoorDash (NASDAQ:DASH) is not necessary for its positive thesis to be realized, it highlighted the possibility as an intriguing factor to consider in the overall assessment of Lyft's market position.
The price target of $23.00 is based on a 15x enterprise value to estimated 2025 EBITDA multiple. This valuation reflects a more optimistic view of Lyft's future financial performance and market share within the ride-hailing industry.
Lyft's stock rating upgrade and the new price target suggest that RBC Capital sees the company as poised for growth, with a solid foundation in place to support its expanding operations and potential new ventures.
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