Lyft and Uber Debate Should Turn to Multi-Year Top-Line Growth

By Sam Boughedda

Morgan Stanley analysts cut Uber (NYSE:) and Lyft ‘s (NASDAQ:) price targets on Monday but remained Overweight on the stocks.

They cut the price target on Uber to $54 from $70 per share and Lyft to $24 from $40 per share.

“We have previously detailed why UBER’s leaner post-COVID cost structure gives us incremental confidence that Rides can generate significant EBITDA/FCF as it scales. And with ~85%+ of UBER’s remaining cost structure variable in nature, the level of EBITDA/FCF is predicated on top-line growth/bookings,” they wrote.

However, Morgan Stanley now believes the 2023 debate should turn to multi-year top-line growth.

“We think investor focus should turn to the achievability of UBER’s (and LYFT’s) multi-year rideshare top-line guidance as we head into ’23,” wrote the analysts.

On Uber, they explained: “Our estimates remain largely unchanged. That said, our lower price target reflects lower peer comps as well as a shift in our valuation methodology from sum-of-the-parts to a regression based on peer growth/margins.”

On Lyft, they stated: “We update our LYFT model for 2Q22 earnings, as we now expect LYFT to grow top-line ~22% from ’21- ’24 vs ~26% previously, largely in line with LYFT’s commentary of ‘low to mid- 20% growth.’ Similar to UBER, we also shift our valuation methodology for LYFT to a regression based on peer growth/margins, taking into account company-wide profitability in our valuation.”