Lyft is a ‘buy’ despite the slide in its share price after earnings and a regulatory overhang, 2 analysts say

john zimmer lyft
Lyft’s John Zimmer in New Orleans in 2018.

  • Lyft got some analyst support on Wednesday after earnings with two top Wall Street analysts reiterating their bullish stances.
  • CFRA’s Angelo Zino reiterated his “buy” rating and $75 price target citing improved pricing.
  • Wedbush’s Dan Ives reiterated his “overweight” rating and $85 price target citing a demand rebound.
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Lyft stock is a “buy” despite the slide in share prices after earnings, according to two top Wall Street analysts.

In a note to investors after Lyft reported earnings, Dan Ives of Wedbush Securities reiterated his “overweight” rating and $85 price target on shares of Lyft.

Similarly, CFRA Research’s Angelo Zino reiterated his “buy” rating and $75 price target.

Both analysts believe the market may be overreacting to regulatory overhang brought about by new pressure on the gig economy.

Lyft stock has been under fire since US labor secretary Marty Walsh said “we are looking at it, but in a lot of cases gig workers should be classified as employees,” in an interview with Reuters last Thursday.

Rideshare services like Lyft and Uber, among a slew of other companies, rely on gig workers’ independent contractor status to reduce labor costs.

On Wednesday things got even worse for Lyft after the Biden administration announced it would end the Trump administration’s “Independent Contractor” rule, which limited the ability of workers to argue that they were misclassified as contractors instead of employees.

The withdrawal of the “Independent Contractor” rule will be published in the Federal Register today, and become effective on Thursday, the Washington Post reported.

Despite the news, some analysts remain bullish on Lyft’s prospects amid the reopening of the American economy.

CFRA’s Angelo Zino said that Lyft is benefitting from improved pricing, rising sales, and a more favorable cost structure after the sale of its Level 5 autonomous vehicle business to Toyota.

Zino did note that there is a “regulatory overhang,” but overall said he was “optimistic” about Lyft’s prospects moving forward.

Dan Ives of Wedbush Securities added similar comments in his note to clients on Wednesday. The analyst said Lyft’s March results gave him “increased confidence” that the company is seeing a “clear demand rebound” heading into the June quarter.

Ives believes Lyft’s guidance for EBITDA profitability by September is reasonable as well.

“Lyft (as well as its stalwart brethren Uber) is set to see a ‘roaring 20’s-like’ rebound into 2H with the red ink soon in the rearview mirror,” Ives wrote.

Wedbush’s managing director of equity research added that he expects there will be a solution to the gig worker dilemma similar to what happened in California back in March.

California voters approved a ballot measure that exempts companies that utilize the “gig economy” from having to treat workers as employees in the first quarter, freeing Uber and Lyft from a 2019 state law that entitled workers to overtime pay, sick leave, and unemployment benefits.

“Management continues to be proactive in labor policy, and we continue to expect a California-like resolution to play out across the rest of the country as well,” Ives wrote.

Read the original article on Business Insider