If you’ve been reading my columns on stocks, you might have figured out by now that I have a tendency to zag when everyone else zigs. That’s the result of my contrarian nature, and it’s been a profitable policy for me over the years.
In the case of Lyft, Inc. (NASDAQ:LYFT), I see folks on social media calling it an ugly stepbrother of Uber Technologies, Inc. (NASDAQ:UBER) and I soak up the hate and smile: that’s exactly the type of bearish sentiment that makes me want to raise my price target on LYFT stock. But I’m not one to invest based on feelings, so let’s dive into Lyft Inc. stock and see what’s really going on under the hood.
Accentuate the Positive
Okay, I get it; it’s hard not to compare Lyft to Uber, as the two companies had their IPOs around the same time, and they’re known for offering similar ride-sharing services. Both companies are easy to lump together, and they’re tempting targets of investors’ frustration, given the backlash against this year’s IPO mania.
It’s also easy to lose patience with LYFT stock, as the LYFT stock price still hasn’t reclaimed $72, where it first began trading back in March. However, I prefer to focus on what I believe to be the bright future of LYFT stock because it’s perfectly normal for a stock to lose value after its IPO hype has worn off and the shares achieve price discovery in the market.
There’s also the criticism of the company as a contributor to the American workforce’s shift towards a “gig economy.” As a serial freelancer myself, I must remind people that post-financial crisis, the gig economy is here to stay, whether Americans like it or not. And, much like the ride-sharing sector of which Lyft has taken a sizable market share, investors can either criticize it or try to profit from it.
Test-Driving LYFT Stock
Irrespective of Lyft’s critics, a quick glance at the numbers reveals a fairly smooth ride for Lyft Inc stock. Lyft’s revenues literally doubled between 2017 and 2018, and LYFT stock price rewarded patient shareholders in June 2019 by surging 14% that month. June 5 was particularly auspicious, as the Lyft stock price increased by 6.5% on a single trading day.
For folks who’ve heeded my advice to wait out the IPO hype and revisit new stocks after they settle into a price range, LYFT hasn’t presented many roadblocks at all. Indeed, LYFT stock price received a nice boost when Susquehanna upgraded Lyft Inc. stock to “positive” on June 11; more encouragement came when Uber CEO Dara Khosrowshahi recently hinted at an easing of the price war between the two companies.
Ridesharing Is Not an Either/Or Market
To be honest, I’m getting a bit weary of hearing people constantly pitting LYFT stock and Uber stock against each other. It’s entirely possible for both companies to succeed in the long run – and it’s equally possible for investors to take a stake in both of them.
In fact, it could be said that Uber and Lyft are on the same team in some respects. In the wake of the California Supreme Court’s ruling that both companies’ drivers should be classified as employees, Khosrowshahi, Uber’s CEO, Lyft CEO Green, and Lyft President John Zimmer got together to defend their independent-contractor business model in The San Francisco Chronicle.
Regardless of how we might feel about collective bargaining and other work-related issues, it’s evident that Uber and Lyft can and will coexist in an expanding ride-share market in which both companies can easily thrive in the coming years.
The Bottom Line on LYFT Stock
The ride-sharing sector will continue to evolve as the issues of workers’ rights, data collection, roadway safety, and traffic congestion are hammered out in the local and federal courts. In the meantime, as part of America’s gig economy myself, I’m glad to recommend LYFT stock as a way for investors to exploit the emerging ride-sharing revolution.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
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