Headquartered in San Francisco, Lyft, Inc. (LYFT) is an on-demand transportation-as-a-service (TaaS) provider. The company provides peer-to-peer transportation and an on-demand ridesharing platform that offers ride-hailing services. It also has a network of shared bikes and scooters in various cities to address the needs of riders who plan short trips.

LYFT’s  revenue improved sequentially in the third quarter (ended September 30, 2020), driven by a meaningful recovery in active riders. Also, the passage of Proposition 22 in California last November was a landmark for the company, allowing it to preserve its gig economy model and potentially enhancing its profitability.

The stock has gained more than 60% since November 9 when the effectiveness of the coronavirus vaccine produced by Pfizer, Inc. (PFE) and BIONTECH SE (BNTX) was announced. We think the  company’s performance should continue to improve as people become less wary of availing themselves of ride-sharing services with the progress on the vaccination front.

Although the company has struggled to generate profits over the years and faces stiff competition from its closest rival, a vaccine-driven economic recovery should help the stock advance. A positive near-term outlook based on several factors has led our proprietary rating system to rate the stock as “Buy.”

Here is how our proprietary POWR Ratings system evaluates LYFT:

Trade Grade: B

LYFT is currently trading above its 50-day and 200-day moving averages of $45.37 and $33.91, respectively, indicating an uptrend. Moreover, LYFT has gained 86.9% over the past three months, reflecting solid short-term bullishness.

For the third quarter ended September 30, 2020, the company’s revenue increased 47.3% sequentially to $499.74 million. Its  number of active riders increased more than 44% sequentially to 12.51 million, and its  revenue per active user increased 2.3% year-over-year to $39.94. However, the company reported a net loss of $459.52 million.

In December, LYFT announced that it is partnering with Anthem, Inc. (ANTM), JP Morgan Chase & Co. (JPM), and United Way to launch a universal vaccine access campaign to address the challenges  many people face in receiving needed medical care due to a lack of transportation.

Buy & Hold Grade: B

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, , LYFT is well positioned. The stock is currently trading 12.3% below its 52-week high of $54.50, which it hit on February 11, 2020.

Even though LYFT has failed to generate profits since its IPO in March 2019. and the coronavirus pandemic significantly impacted its business, investors are optimistic about the potential for heightened for the company’s services in the post-COVID-19-pandemic world.

Peer Grade: D

Uber Technologies, Inc. (UBER) is LYFT’s biggest rival in the ride-sharing industry. While UBER returned 46.6% over the past year, LYFT gained only 0.7% over the same period.

Industry Rank: C

The travel industry, particularly the ride-sharing segment, was severely hit by the pandemic as people observed social distancing protocols and remote lifestyles.

The industry is expected to recover as the economy gradually re-opens following global vaccine deployment. However, as the remote lifestyle is expected to continue even in the post-vaccine world, the future of the transportation and ride-sharing industry looks uncertain.

Overall POWR Rating: B (Buy)

LYFT is rated “Buy” based on an expected revival of demand for its services, with the vaccines tempering  consumers’ concerns about ride-sharing and several other factors as determined by the four components of our POWR Ratings system.

Bottom Line

The company is expected to fare better once more vaccines become available and people become more confident in using ride sharing services.

LYFT’s revenue and EPS are expected to increase by 40.7% and 51.4%, respectively, in 2021. The company has an impressive earnings surprise history as well; it beat the consensus EPS estimates in each of the trailing four quarters.

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LYFT shares were trading at $45.79 per share on Monday afternoon, down $2.02 (-4.23%). Year-to-date, LYFT has declined -6.80%, versus a 2.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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