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Lyft Stock Slips Below its IPO Price After Receiving its First Sell Rating

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【Summary】Lyft received its first negative review from an analyst who is skeptical that consumers will give up personal car ownership in favor of relying on ride-hailing services. Lyft’s shares fell as much as 4.2 percent to $66.10 on Tuesday, their second straight session of losses after $72 initial public offer on Friday.

FutureCar Staff    Apr 02, 2019 1:00 PM PT
Lyft Stock Slips Below its IPO Price After Receiving its First Sell Rating
A NASDAQ billboard in New York's Times Square commemorating Lyft's IPO on Friday March 29, 2019.

Ride hailing-company Lyft Inc. became the first ride-hailing company to go public last Friday, beating its chief rival Uber to an IPO. Lyft shares, trading on the NASDAQ under the symbol LYFT, initially surged 10 percent higher, but have since fallen further below its IPO price on its third official trading day.

Lyft also received its first negative review from an analyst who is skeptical that consumers will give up personal car ownership in favor of relying on ride-hailing services.

Lyft's shares fell as much as 4.2 percent to $66.10 on Tuesday, their second straight session of losses after  $72 initial public offer on Friday. Lyft's IPO is one of the most anticipated IPO's from a tech company. The stock was down 2.3 percent at $67.41 early on Tuesday afternoon on the Nasdaq.

Michael Ward of Seaport Global Securities initiated coverage of Lyft with a "sell" rating and a $42 price target, which is 42 percent below the initial public offering price of $72. with analyst Michael Ward calling the stock's current valuation a "leap of faith" that consumers will forego owning cars in favor of using ride-hailing services.

"Despite the optics of vehicles being an underutilized asset, we believe people will continue to own their own vehicles as primary transportation and instead rely on the ridesharing services as a convenient supplement," Ward wrote in a client note.

Lyft's valuation surged to $25 billion after its IPO and its main rival Uber could be as high as $120 billion when the company goes public later this year. However both companies remain unprofitable, which doesn't sit well with many investors. On the upside, Unlike Uber with its global reach, Lyft only operates in North America, so it still has substantial growth potential.

"We have a history of net losses, and we may not be able to achieve or maintain profitability in the future," Lyft wrote in its IPO prospectus released on March 1, adding that it expects to spend more as it expands into new offerings and locations.

Another five analysts have initiated coverage of Lyft, with two of them recommending the stock and three assigning neutral ratings, according to Reuters.

Lyft's losses widened in 2018, although revenue doubled to $2.16 billion. The company is still gaining market share from rival Uber. Those five analysts on average expect Lyft's revenue to jump 60 percent to $3.45 billion in 2019, while Ward estimated 2019 revenue would reach $3.40 billion.

In Lyft's IPO prospectus, the ride-hailing company said it controlled 39 percent of the ride-hailing market in the U.S. However Second Measure, an analytics firm which tracks credit card transactions, estimates Lyft's market share at 28.4 percent.

Lyft reported a loss of $911 million in 2018 and a $688 million loss in 2017. The company has not said when it expects to become profitable.

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