Wedbush analyst Daniel Ives notes that Uber (UBER), Postmates, and two contractors who work for the companies filed a lawsuit against the state of California alleging the recently passed AB5 bill is unconstitutional. The suit kicks off what he believes will be "a nasty and prolonged battle with AB5 threatening the core of the Gig Economy." Ives believes this "clearly represents a major negative hanging" in the balance for the industry and more so Lyft (LYFT) as California represents a larger piece of its business being purely domestic versus the likes of Uber currently in over 60 countries and continuing to expand globally. The analyst does not see the legal headwind dissipating in the near-term, but sees added risk from aiming to take a greater share of the fare from drivers and expects that the more the companies push on this front, the more drivers will fight back and protest, increasing the likelihood of regulations.

Jefferies raised the firm's price target on Uber to $103 from $100 and keeps a Buy rating on the shares. Results should display continued focus on using non-core investments to drive elevated GBV growth, though avoiding a material drop in incremental margins is key to keep investors positive, the analyst tells investors in a preview note for the U.S. Internet group.