Shares of the ride-sharing app Lyft Inc. got a boost on Monday after analysts predicted the company could be profitable sooner than expected.
Lyft shares jumped to 4.3% after Guggenheim Securities analysts Jake Fuller and Ali Faghri said the company should turn a profit by 2021, rather than 2023. This is following its latest price increase.
The report helped quell some of the worries investors have had about Lyft’s sizable losses. Lyft shares have fallen nearly 30% since their public debut in late March. This has caused investors to worry about the company’s reliance on deep fare discounts and driver subsidies to compete with Uber Technologies Inc. and other rivals keeping profitability out of reach for several years.
But the company is now making an effort to reverse its fortunes sooner. Earlier this month, Lyft financial chief Brian Roberts said the company had increased prices on routes in some cities in June but didn’t offer further details on where and by how much. Although some analysts and investors have expressed concerns the price increase could end up alienating riders, Guggenheim’s analysts said they don’t expect demand to suffer.
“We are raising estimates, putting us significantly ahead of consensus,” Guggenheim said in its report. “The main driver is assumed price increases, with limited impact on demand.”
Fuller and Faghri have a $60 price target on Lyft shares, and they have taken a more optimistic view than their colleagues. A consensus of analysts predict annual losses will narrow from about $911 million this year to $24 million in 2024, according to FactSet.
Uber, meanwhile, reported its largest-ever quarterly loss earlier this month. Shares, which were mostly flat Monday, are down 26% since their initial debut in May.
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