On Wednesday, a Gordon Haskett analyst became positive on Lyft stock for the first time in more than a year, providing some respite for investors hit by a slew of negative headlines in recent days.
Lyft Stock Discussion
The Lyft stock of the ride-sharing app fell by more than 12 percent on Tuesday after the United States Department of Labor released a recommendation that might require the company to categorize drivers as employees rather than independent contractors. The announcement came shortly after at least two market analysts had cut their recommendation on the company to a level similar to neutral, citing rising hurdles from the competition by Uber Technologies (UBER). Over the past month, Lyft stock has experienced a decline of 38%.
However, Robert Mollins, an analyst at Gordon Haskett, believes that the underperformance of the shares, when combined with other factors such as an increase in the supply of drivers and improved conversion rates (the percentage of people who open the app and then take a ride), creates a favorable balance between potential risks and rewards. After having it on Hold since August of last year, he changed his rating on the shares to Buy on Wednesday after having it at Hold since then.
On Wednesday, the stock’s price reached $11.96 after a gain of 6%. Price is expected to reach $24 according to Mollins’ projections. According to what he had said, “we see various catalysts to drive multiple expansion in the near-term.”
First things first, according to Mollins, concerns concerning the availability of drivers are unwarranted and unfounded. Although an analysis conducted last week by RBC analyst Brad Erickson on 400 rides showed that Lyft Inc.’s (NASDAQ:LYFT) pick-up times were 10% slower than Uber’s, Mollins’ proprietary data on 840 rides indicate that wait times have improved by a half-minute quarter over quarter. This contrasts with Erickson’s finding that, on average, Lyft’s pick-up times were 10% slower than Uber’s. RBC’s assessment has been challenged by Lyft, which asserts that it reached a new peak in the number of drivers during the third quarter, which concluded in September.
According to the Haskett analyst, the commentary provided by management regarding conversation rates is also positive. Lyft stock reported not so long ago that the company’s conversion rates in the third quarter were the highest in some years.
To be clear, Mollins continues to believe that “Lyft is disadvantaged in comparison to Uber” and maintains a Buy rating for Uber. However, at this moment, it seems like Lyft’s investors are happy to hear any news as long as it is not harmful. The company’s third-quarter results are typically made public sometime around the beginning of November.
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Author Ivy Palinlin 
