Lyft Faces Intense Competition from Uber, Margins Threatened
Lyft's intense rivalry with Uber Technologies is pressuring its margins, according to analyst Oliver Lester of Arete Research Services LLP. Lester has downgraded Lyft to a "sell" rating, citing concerns that Uber's competitive pricing and service offerings are forcing Lyft to sacrifice margins to maintain growth.
Lester forecasts limited potential for margin improvement in Lyft's fiscal year 2025. He notes that Uber's "copying of innovations, reducing prices, and stealing away key partners" has exposed Lyft's vulnerability.
Among analysts, Lyft currently holds 12 buy-equivalent recommendations, 33 holds, and one sell (Lester's). Lester's price target of $10 is the lowest on the market, implying a significant downside potential.
Despite being Uber's primary rival in the US, Lyft has struggled to differentiate its services. Uber has launched comparable offerings to almost all of Lyft's innovations, including price lock.
Lester highlights Uber's superior position in countering threats from autonomous vehicle companies like Waymo LLC. He believes Uber can mitigate the impact by replicating innovations and attracting Lyft's partners.
Lester warns that the risks to Lyft's business model from autonomous vehicles will persist beyond fiscal year 2025 as Waymo and other companies make progress in deployments.