DA Davidson Remains Bullish On Lyft, Despite Weak Uber IPO Raising Concerns Over Ride-Hailing Model

Shares of Uber Technologies Inc (NYSE: UBER) have delivered weak performance since the ride-hailing company's Friday IPO, reflecting investor concerns around its business model, according to D.A. Davidson.

Recent discussions with investors suggest a significant change in sentiment related to ride-hailing companies over the past week, the sell-side firm said Monday.

LYFT Inc (NASDAQ: LYFT) has a more resilient revenue growth rate and has steadily gained share versus Uber, D.A. Davidson said. 

The Analyst

Tom White maintained a Buy rating on Lyft with a $72 price target.

D.A. Davidson has a Neutral rating on Uber Technologies with a $53 price target.

The Thesis

Although there is investor concern around the ride-hailing business model, the sentiment toward Uber seems mixed rather than overwhelmingly negative, White said in a Monday note. (See his track record here.) 

Uber’s focus on its long-term story during its roadshow pitch may have caused concern among investors with short- to intermediate-term horizons, the analyst said. 

While Uber’s near-term trends reflect a sharp deceleration in revenue growth and deteriorating core platform margins, Lyft has a stronger brand, improving profitability trends and more resilient revenue growth, White said. Lyft has steadily gained market share from Uber, he said. 

Contrary to the broad consensus, White said Uber’s stock does not deserve to trade at a meaningful premium to Lyft.

Price Action

Lyft shares were trading 5.07-percent higher at $50.59 at the time of publication Tuesday. 

Related Links:

Large Bearish Lyft Option Trades Suggest There Could Be More Downside Ahead

Uber's Disappointing IPO: What The Pros Are Saying

Photo courtesy of Lyft.