Lyft (LYFT) shares opened lower on Tuesday, just one day after Guggenheim upgraded the ride-hailing company to Buy. The move came four months after the firm initiated it at Neutral following its highly-anticipated IPO.
Analysts Jake Fuller and Ali Faghri set a $60 price target on the stock and expect Lyft to be profitable by 2021, which is two years sooner than they previously expected.
“Underlying our upgrade and revisions is a a simple idea: We all under-estimated how quickly the competitive mindset might shift under public ownership and how much leverage there is in the model to pricing,” they wrote.
Indeed, the analysts argue that with rival Uber (UBER) focusing on other initiatives, there is more competition in the ride-hailing space, which gives Lyft a “surprising leverage.”
“The key driver of this improving competitive backdrop is simple: LYFT and UBER are now public, and UBER needs margin from U.S. ride hail to support efforts internationally and in the highly competitive restaurant delivery business,” Fuller and Faghri said.
The Guggenheim upgrade is Lyft’s third in August, according to data compiled by Bloomberg. Atlantic Equities upgraded Lyft shares to neutral on August 8, setting a $60 price target. Meanwhile, Morningstar set its target price at $72 with a “buy” rating.
Back in April, Guggenheim initiated Lyft at neutral, with the analysts citing key issues, including profitability, sustainability of revenue growth, scale of investments in things such as bikes, scooters and self-driving cars, and valuation.
Shares of Lyft are down nearly 40% since going public in March. Rival Uber’s stock is down about 20% since its IPO in May.
Pamela Granda is a producer on Yahoo Finance’s closing bell show, The Final Round. Follow her on Twitter.