By Mackenzie Tatananni

Lyft faces fierce competitive pressure from far-larger Uber Technologies, but one analyst believes Wall Street's worry has created a buying opportunity.

On the heels of Lyft's strong first-quarter earnings, Goldman Sachs analysts led by Eric Sheridan upgraded shares of the ride-hailing company to Buy from Neutral with a $20 price target.

Shares surged 22% to $15.84 on Friday, putting the stock on pace for its largest same-day percentage increase since Nov. 7, 2024, according to Dow Jones Market Data. The firm's target suggests potential 26% upside from the current price.

In Sheridan's view, concerns including the potential disruption from autonomous-vehicle operators like Waymo and the "solid cadence" of new partnerships signed by Uber in recent weeks, are more than discounted into the stock price.

Self-driving vehicles commonly seen as the next frontier. Sheridan said the AV ride-sharing landscape "remains in its very early days," and AV operators and fleet owners should continue into partnerships in the coming years.

Lyft, for one, has an opportunity to carve out a niche in the broad hybrid and AV ecosystem, with "an important role to play" in demand generation and fleet management, Sheridan said.

Competitive pressure isn't expected to let up anytime soon, and the duopoly structure of the North America ride-sharing market, where Uber Technologies and Lyft wrestle for increased share, may seem daunting.

Uber is a much larger presence in the industry, as evidenced by the company's $172.1 billion market cap, which dwarves Lyft's $5.47 billion.

However, this arrangement is "supportive of rational competitive behavior in the years ahead," and may push Lyft to become even more efficient, Sheridan indicated.

The bottom line is that Lyft's execution has been solid as of late, in the analyst's view. He noted that the company logged 16% rides growth in its most recent quarter.

Oppenheimer analyst Chad Larkin was similarly upbeat. In a note Friday, Larkin reiterated an Outperform rating on Lyft shares and boosted his price target to $17 from $15.

In his view, Lyft's "core fundamentals remain strong," and the company isn't seeing any consumer softness and both active riders and frequency accelerated in the quarter.

The company's focus on supply and new products is working, "and high-car-density cities are still largely untapped," Larkin wrote. He noted that Lyft Black, the company's premium ride-share offering, was growing twice as fast as overall rides.

Notably, more consumer optionality is resulting in more habitual use, with commuting now 1/3 of total rides.

Lyft reported its latest financial results on Thursday, a day after Uber issued a mixed first-quarter print. Shares of Uber Technologies were up 1% on Friday, while the benchmark S&P 500 was up 0.3%.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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May 09, 2025 10:31 ET (14:31 GMT)

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