Lyft stock price was trading at $12.60 as of 10:41 AM EDT on Friday
The ride-sharing company's shares fell on Friday after investment firm RBC downgraded it, citing "structural difficulties" and the possibility that Uber Technologies (NYSE:UBER) may have a competitive advantage.
According to analyst Brad Erickson, Uber's (NYSE:UBER) "structural advantages" are escalating the battle between the two businesses at a time when Lyft (NYSE:LYFT) may struggle to keep up. He downgraded his rating on Lyft (LYFT) shares from outperform to sector perform.
Erickson reduced the price objective on Lyft (NYSE:LYFT) from $30 to $16 in a letter to investors, writing, "We believe UBER's structural advantages are driving higher competitive intensity for LYFT where [long-term] profit targets likely constrain its flexibility to maneuver."
According to the analyst, Lyft (LYFT) is seeing "directionally worse pick-up delays" than Uber (UBER), which raises questions about Lyft's driver supply. In addition, Uber (UBER) is currently experiencing its smallest pick-up window since May 2021, which Erickson said may be an "incremental conversion headwind" for Lyft.
LYFT stock price exposure
The analyst also pointed out that Lyft's (NYSE:LYFT) excessive exposure to the west coast of the United States could be detrimental, with Los Angeles being considered as a "possible canary in the coal mine" as Uber continues to increase supply there.
The potential of Lyft (NYSE:LYFT) to reclaim market share may be constrained by its 2024 target of generating $1 billion in adjusted EBITDA and $700 million in free cash flow, according to Erickson.
While striving for profitability is undoubtedly a good thing in the current economic context, the analyst warned that it might also be a limiting factor for LYFT in the event that increased competitive intensity occurs. It was announced last month that Lyft (NYSE:LYFT) would stop hiring in the United States until the end of the year.
What Were The Reasons Behind Today’s Decline In Lyft Stock
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