Lyft Surges on IPO

Shares Lyft surged on their first day of trading, closing up over 8% at $78.29, having hit a within-day high of $88 - but what is the Morningstar view on the ride-sharing firm?

Ali Mogharabi 1 April, 2019 | 10:39AM
Facebook Twitter LinkedIn

Lyft

Shares in ride-sharing firm Lyft (LYFT) surged on their first day of trading, closing up over 8% at $78.29, having hit a within-day high of $88.

Morningstar analysts initiated coverage of the firm with a fair value estimate of $72 per share and assigned a narrow moat rating, which means the company has a slim competitive advantage.

Lyft became a public company, selling 30.8 million shares at an IPO price of $72 per share on March 29, 2019. The IPO price is in line with our fair value estimate and we would recommend a wider margin of safety before investing in this very high uncertainty name.

Founded in 2012, Lyft has emerged as the number two ride-sharing player in the US market behind Uber, which is expected to float on the stock exchange soon. In our view, Lyft warrants a narrow economic moat and a stable moat trend rating, thanks to the network effect around its ride-sharing platform and intangible assets associated with rider, rides, and mapping data, which we think can drive Lyft to profitability and excess returns on invested capital in the future.

In contrast to Uber, Lyft is not focused on food transportation or logistics. We like Lyft's relatively narrower focus on consumer transportation but still note that Uber has an edge on Lyft in terms of an earlier start, higher market share, and a stronger network effect around its service.

 

 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Lyft Inc Class A36.80 USD-2.13Rating

About Author

Ali Mogharabi  is an equity analyst for Morningstar