Ride-hailing firm Lyft (LYFT) received its first Buy rating from Wall Street ahead of its initial public offering. The news comes as reports suggest the IPO is oversubscribed based on commitments made so far by investors.
FIRST BUY RATING: DA Davidson analyst Tom White initiated Lyft with a Buy rating and $75 price target on Tuesday after the market close, ahead of the company's IPO filing next week, which has a target price range of $62 to $68 per share. The company has made "impressive" market share gains within the U.S. as demand for ride-sharing continues to grow, White told investors in a research note.
White also cited Lyft's ability to attack rival Uber's (UBER) dominance in recent years, saying that while Lyft has benefited from a series of public relations, management and operational stumbles at Uber, its biggest competitor, Lyft, is "deftly maximizing the benefits by aggressively differentiating its brand/mission around socially-conscious values and corporate responsibility."
White is also bullish on the total addressable market for personal transportation, which he said U.S. consumers are spending $1.2T on annually. "On-demand services have already disrupted traditional ownership models in sectors like entertainment/computing," White contended, adding that "The continued population migration to cities and the rising costs of personal car ownership will further drive adoption of 'Transportation as a Service' models over the coming years. Lyft is the No. 2 player in the ride-sharing market and has grown its share to 39% from 22% in the past two years, he said.
The analyst said that while he questions Lyft's competitiveness when it comes to scaling its own autonomous driving system, primarily due to relative lack of scale and a late start, he believe its "platform" play for other autonomous driving players can help "afford it some time to either perfect/scale its own technology or secure a long-term partner."
IPO OVERSUBSCRIBED SO FAR: According to a Reuters report out Tuesday, Lyft's IPO is already oversubscribed based on investors' commitments. This would make it likely the ride-hailing startup could exceed a $23B valuation, according to the report, which cited people familiar with the matter. The development suggests that many investors are willing to overcome uncertainty over the startup's path to profitability and its strategy for driverless technology, Joshua Franklin wrote. The company's roadshow is already underway.
WHAT'S NOTABLE: Uber is said to be looking to kick off its own IPO offering next month in a deal valuing the company at $120B. Lyft’s progress in its IPO could bode well for Uber's own IPO.
Other tech firms including Pinterest (PIN), Postmates, Airbnb and Slack have have also signaled U.S. IPO plans this year. All are seeking high valuations, with their offerings likely to bring a wave of wealth to tech investors, founders and early employees that will once again rev up the Silicon Valley start-up ecosystem, according to a New York Times report.
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