Investors should “steer clear” of
Lyft,
one analyst team argued as it slashed its rating on the ride-hailing company ahead of earnings.
MoffettNathanson analysts led by Michael Morton lowered their rating on
Lyft
(ticker: LYFT) to Sell from Neutral and cut their price target to $7 from $10 in a research report.
Shares of Lyft were trading down 1% to $9.34.
“When it comes to company disclosures, we’ve never been a believer that ‘less is more,’” the analysts wrote, referring to the company’s decision a few years ago to stop providing disclosures on ride volume and gross bookings.
Lyft is scheduled to post fiscal third-quarter earnings on Nov. 8, and alongside those results the company is expected to offer long-term guidance and potentially further information on bookings and volumes, but the analyst team isn’t optimistic.
“When it comes to raising prices, Lyft is beholden to its more scaled, better funded, and more profitable peer,
Uber,
” they wrote. “Recently, Uber has demonstrated more patience raising ride-share prices and take-rates domestically, causing Lyft to lose significant market share.” A take rate is how much a company makes from each booking.
Lacking that boost from take-rates and higher prices, the analysts are expecting gross margins to decline sharply in the future “as insurance cost growth outpaces pricing growth.”
They also expect any long-term guidance to come in below estimates.
It’s been a tough year for Lyft shares, which have fallen 15%, while
Uber Technologies
(UBER) has soared 72%. Last month, the Securities and Exchange Commission said Lyft will pay a $10 million penalty after it did not disclose a large stock transaction prior to its initial public offering.
Write to Emily Dattilo at [email protected]
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