Why is Lyft Stock So Cheap?

This is one of our cheapest tech stocks with a moat.

Andrew Willis 26 May, 2023 | 4:10AM
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Andrew Willis: Everyone knows that Lyft (LYFT) is in second place when it comes to car sharing. But why must investors punish the price to the point that it’s beginning to look like a small-cap value stock?

Lyft should remain the number two-ride sharing partner for years to come. And that’s great. The firm’s narrow moat should help the company maintain its market share in an industry expected to grow from 430 to 670 billion dollars by 2027.   

Lyft has been competing on prices lately, but senior equity analyst Ali Mogharabi says the company would be just fine pricing in line with competitors. Each platform has its target market and business efficiencies. Uber offers both food and rides on-demand, while Lyft is a one-stop shop to get people from Point A to Point B – or the DoorDash of rideshare.

For Morningstar, I’m Andrew Willis. 

 

bulls Bulls Say

  • Lyft’s position in the autonomous vehicle race could equalize gross and net revenue, if it no longer needs to pay drivers.
  • Lyft will profit from its do-good brand in comparison with competitor Uber.
  • The company's aggregation of multimodal offerings will drive in-app stickiness, making Lyft a one-stop shop for all transport needs.

bears Bears Say

  • The development of autonomous vehicles, especially Google’s Waymo, could eliminate the need for all existing ride-sharing platforms, driving Uber and Lyft out of business.
  • Ride-sharing is still a relatively new industry, which leaves plenty of room for increasing regulations that could hurt Lyft’s margins.
  • Lyft may lose on pricing power if competitors with larger markets use profits from its monopolistic regions to drive down prices in the U.S. and Canada.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Lyft Inc Class A18.76 USD-3.89Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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