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.

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Uber reveals March bookings were the highest in company history as ride-hailing rebounds from the pandemic

GettyImages 1176816141 (1) NEW YORK, NEW YORK - SEPTEMBER 24: Dara Khosrowshahi, CEO, UBER, speaks onstage during the 2019 Concordia Annual Summit - Day 2 at Grand Hyatt New York on September 24, 2019 in New York City. (Photo by Riccardo Savi/Getty Images for Concordia Summit)
Uber CEO Dara Khosrowshahi.

  • Uber saw record demand for its ride-hailing services in March, it said Monday
  • The company also hit another record for its delivery services.
  • Uber faces some difficulty finding drivers to meet post-pandemic demand for its services.
  • See more stories on Insider’s business page.

Uber on Monday revealed record bookings for the month of March 2021, fueled by an resurgence in travel as pandemic restrictions around the world slowly begin to slip away.

The company, which lost nearly $6.8 billion last year, said in a regulatory filing that March bookings were up 9% month-over-month to the highest level in company history. As a result, the company believes it can still become profitable by the end of 2021 on an adjusted EBITDA basis.

Uber’s ride-hailing service was hit hard by the pandemic last year as lockdowns diminished the need for trips, a rut that was in large part buttressed by an intense focus on food delivery. Uber’ Eats also set a record last month, spiking over 150% year-over-year and hitting a record annual run rate of $52 billion last month.

Read more:Uber is battling DoorDash to rule food delivery. These are the steps Uber’s CEO is taking to topple Eats’ biggest rival.

The increase in booking in the past month has been largely fueled by optimism surrounding increased vaccination in the US and could be a sign things might be starting to return to normal.

“As vaccination rates increase in the United States, we are observing that consumer demand for Mobility is recovering faster than driver availability, and consumer demand for Delivery continues to exceed courier availability,” the company said.

Uber’s stock rose on the news of a rebound in recovery on Monday, climbing as much as 4% in early trading Monday following the disclosure.

The need for ride-hailing services is also setting up a potential shortage of drivers for Uber and competitors like Lyft.

Just last week, Uber announced that it plans to spend $250 million on incentives and guarantees for drivers. The move is a part of an effort to get more drivers back on the road following a shortage caused by the COVID-19 pandemic.

“In 2020, many drivers stopped driving because they couldn’t count on getting enough trips to make it worth their time. In 2021, there are more riders requesting trips than there are drivers available to give them-making it a great time to be a driver,” Dennis Cinelli, the head of Uber’s US and Canada ride-hailing business, said in a blog post.

Read the original article on Business Insider