Shares in the ride-hailing app - and Uber competitor - Lyft dropped as much as 50% from its IPO (Initial Public Offering) price of $72. However, that hasn't stopped some analysts turning bullish on Lyft and forecasting a near 130%+ rise in its share price. It's a bold call. Let's find out if it has any merit.
Who is Lyft?
Lyft isn't yet as big as its rival Uber. So here's what you need to know about the company which launched in 2012 and is known as the second-largest ride-hailing company in the United States:
- Lyft's market share in the U.S. is around 29%
- Lyft only operates in the US and Canada at this time
- Lyft completes around 1 million trips per day
- In 2018, they completed 103% more trips than the year before
- Lyft increased their gross bookings by 76% from 2017 to 2018 to $8.1 billion
These were the statistics given in Lyft's pre-IPO material. Investors certainly liked it as the offering was oversubscribed with the stock surging 21% higher above its IPO price of $72 per share when it first became available for trading on the Nasdaq Stock Exchange on 29 March.
However, the hype did not last and shares of Lyft subsequently fell to an all-time low of $37.04 on 10 October. But that has not stopped JP Morgan analyst Dough Anmuth putting out a bold call for an investment bank - for Lyft to trade all the way up to $85 per share. Let's look at why.
Can Lyft's stock double in price?
In a research note sent to clients reviewing Lyft's third-quarter earnings, Anmuth wrote: "Lyft reported significantly better than expected revenue and [operating earnings], as it continues to take share of an increasingly rational U.S. ride-share market." He is not the only analyst bullish on Lyft stock. In fact, Lyft is a consensus buy on Wall Street, according to Barrons.
Loop Capital Markets analyst Jeffrey Kauffman upgraded Lyft shares to buy from hold, stating that "The U.S. rides business is showing competitive rationality, allowing Lyft's share gain and margin expansion to continue."
Analysts are turning bullish on the company due to the fact it has strong execution and now benefits from a better competitive environment. Technical analysts have also turned bullish on Lyft's share price as it has broken its most recent downtrend, as we discuss in more detail next.
How to trade Lyft shares
With Admiral Markets you are able to speculate on the share price of Lyft by using a product called CFDs, or Contracts for Difference. Essentially, this enables traders to go long and short on an instrument.
Below is the daily chart of Lyft Inc CFD:
Source: Admiral Markets MT5 Supreme Edition, Lyft, Daily - Data range: from 17 May 2019 to 26 November 2019, accessed on 29 November 2019 at 10:35 am GMT. Please note: Past performance is not a reliable indicator of future results.
In the above daily chart of Lyft's share price, it is clear to see the most recent sell-off in price from July to October 2019. Since reaching an all-time low of $37.04 on 10 October, technical analysts will be encouraged by the fact that price has seemingly turned upwards creating a series of higher highs and higher low cycle formations.
In fact, the 20-period exponential moving average shows a potential change in trend as Lyft's share price now trades above it, as shown below by the blue wavy line:
Source: Admiral Markets MT5 Supreme Edition, Lyft, Daily - Data range: from 17 May 2019 to 26 November 2019, accessed on 29 November 2019 at 10:45 am GMT. Please note: Past performance is not a reliable indicator of future results.
Moving averages are used to help identify the trend of the market, as well as for areas of support and resistance where price could change direction. In the chart above, the price stayed below the 20-period exponential moving average (the blue line) during its sell-off. Now that the price is above it, there is an interesting combination of bullish technical information as well as bullish fundamentals.
When technical analysis and fundamental analysis combine it can often lead to some very powerful trends, albeit not all the time. And with some analysts forecasting a move back up to $85 per share, a near 130%+ rise, the stock may attract many more traders and investors.
How will you be trading it?
You can learn more about different types of trading strategies in the Admiral Markets Trading Strategies article. However, if you're feeling inspired to start trading today, or this article has provided some extra insight to your existing trading knowledge, you may be pleased to know that you can download the MetaTrader 5 trading platform provided by Admiral Markets completely free and access the Lyft Inc CFD, along with other advanced trading features!
Click on the banner below to start your free download:
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