On Wednesday, JPMorgan revised its price target for Lyft (NASDAQ:LYFT), increasing it from $13.00 to $18.00, while maintaining a neutral rating on the stock. This adjustment follows Lyft's announcement of positive first-quarter results, which included over 20% growth in rides and gross bookings, a 28% increase in revenue, and a free cash flow (FCF) of $127 million. The ridesharing company also raised its FCF outlook for the year, now expecting over 70% conversion of EBITDA, a significant rise from the previous forecast of 50%.
The firm noted that Lyft's success is partly due to its focus on customer satisfaction for both drivers and riders. The company has achieved the highest driver levels in over four years, attributed to initiatives such as greater rides transparency, a new earnings commitment, and Women+ Connect.
Riders have also been experiencing the fastest pick-up times in four years and more stable pricing. Although Lyft's management did not claim market share gains, these improvements have been seen as steps towards enhancing competitiveness in the rideshare industry.
JPMorgan anticipates that Lyft's Investor Day, scheduled for June 6, 2024, in New York, will shed light on continued innovations for drivers and riders, strategies for profit margin improvements, and potential international expansion plans. Preliminary discussions suggest that expectations for the event include a three-year outlook featuring mid-teens Gross Bookings growth and incremental EBITDA margins between 5-10%, with a long-term EBITDA margin target of approximately 5% of Gross Bookings.
After the first-quarter earnings report, JPMorgan has increased its 2024 and 2025 estimates for Lyft's Gross Bookings by about 1%, and Revenue estimates by 6% and 5%, respectively. However, the firm has reduced its EBITDA estimates for the outer years, which were previously above the consensus. The new price target of $18 is based on approximately 12.0 times the firm's projected 2025 Adjusted EBITDA, or roughly 16.0 times the expected 2025 Free Cash Flow.
InvestingPro Insights
In light of JPMorgan's updated assessment of Lyft, current data from InvestingPro further contextualizes the company's financial health and market performance. Notably, Lyft holds a market capitalization of $7.17 billion, reflecting its considerable presence in the ridesharing sector. Despite facing challenges with profitability, as indicated by a negative P/E ratio of -26.63 for the last twelve months as of Q4 2023, analysts expect a positive turn with net income growth projected this year. This aligns with the company's strong revenue growth of 7.53% over the same period, suggesting an upward trajectory.
InvestingPro Tips underscore that Lyft's stock is known for high price volatility, which could be a point of consideration for investors seeking stable investments. However, the company has demonstrated a robust return over the past year, with a 94.38% total return, highlighting potential for those willing to navigate the associated risks. For those interested in further insights, InvestingPro offers additional tips on Lyft's financials and market performance, which can be accessed by visiting the dedicated page for Lyft at https://www.investing.com/pro/LYFT. By using the coupon code PRONEWS24, readers can enjoy an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of information including 11 more InvestingPro Tips to inform investment decisions.
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