It's never too late to have an opinion on Uber Technologies (UBER +0.46%) and Lyft (LYFT +2.51%). Evercore ISI analyst Benjamin Black initiated coverage of the two recently public ridesharing companies on Wednesday afternoon, weeks after most Wall Street pros have offered up their first impressions.
The good news for investors is that Black is bullish on both players. He sees the operating climate improving in the near term, with Uber and Lyft weaning themselves off of their heavy promotional activity to make this a more favorable pricing environment for the two industry leaders. His price targets -- calling for Lyft and Uber to hit $74 and $60, respectively -- may not have seemed so ambitious when Lyft and Uber went public at $72 in late March and $45 in early May, respectively. However, with both stocks trading below their debutante price tags Black's targets call for 27% of upside for Lyft and 42% for Uber. That's a healthy amount of headroom for two of the biggest battleground stocks of the 2019 rookie class.
Image source: Lyft.
Shifting into drive
Evercore ISI's analyst feels that Uber and Lyft can turn the corner to become profitable sooner than analyst consensus expectations. There's a lot of wiggle room there, as Wall Street doesn't see either company out of the red until 2023 at the earliest.
There will never be a dull moment for investors in either stock. This week alone we're seeing a NY Daily News story detailing New York City Mayor Bill de Blasio's plan to cap the amount of time that ridesharing drivers can spend in congested parts of Manhattan without active passengers. The CEOs at Uber and Lyft also came together for an op-ed in the San Francisco Chronicle defending why their drivers are independent contractors instead of being classified as employees, a sticking point with some that would naturally disrupt its pricing model if regulations forced the industry's hand.
There doesn't seem to be a week that goes by without a nugget or two on new products or new technology. Uber announced an expansion of its flying taxi plans, naming Dallas, Los Angeles, and Melbourne (Australia) as test sites for its pilotless aircraft service starting next year. It also took another tech step in the push for self-driving cars, a seismic shift if and when the hot trend goes mainstream.
Investors that can stomach the volatility can do worse than kicking the tires of Uber and Lyft right now. You can buy into either company for less than those that got in on the IPO, and that's with Uber's starting line already discounted as a result of Lyft's disappointing debut. Even with both stocks already bouncing back after bottoming out exactly one month ago -- on May 13 -- the pessimism remains thick.
Both companies continue to collectively lose billions a year, but with their driver and rider bases growing briskly, it may not be fashionable to hate on Lyft and Uber for much longer. Evercore ISI's Black gets it. He may have been late with his rating initiation, but he won't be the last to come around.
