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March 25, 2019, 6:56 a.m. EDT

Lyft gets its first buy rating ahead of IPO that’s expected to price next week

Lyft IPO gives investors opportunity to invest in company that's growing fast and capturing share from rival Uber, analyst says

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By Ciara Linnane, MarketWatch


Lyft Inc. ‘s initial public offering will give investors their first chance to invest in a ride-sharing service that’s growing fast and capturing significant market share from its bigger rival Uber.

That’s the view of D.A. Davidson analyst Tom White in a note to clients initiating coverage of the stock with a buy rating and price target of $75, or 10% above the top end of the company’s IPO price range of $62 to $68. Lyft is expected to price the deal next week and it’s already oversubscribed, according to the New York Post.

Lyft has grown its market share to 39% from 22% in the past two years, benefiting from the public relations and operational troubles at Uber, which is also planning to go public this year.

Uber’s former chief executive Travis Kalanick was forced out in 2017 after pressure from investors, following reports of a workplace culture that included widespread sexual harassment and discrimination and the use of special software to deceive regulators.

But Lyft is “deftly maximizing the benefits by aggressively differentiating its brand/mission around socially-conscious values and corporate responsibility,” White wrote in a note. “This is good PR, but also good for business (~80% of LYFT’s New Active Riders in the fourth quarter of 2018 downloaded the LYFT app organically.”

See also: Lyft IPO: 5 things to know about the ride-sharing service ahead of its IPO

In case you missed it: Stampede of the ‘decacorns’: Here are the big-name startups preparing for 2019 IPOs

U.S. consumers are spending $1.2 trillion annually on personal transportation, said the analyst. For TaaS players—or transportation as a service—that may lead more Americans to move away from owning their own car in the coming years. Meanwhile, Lyft and rivals have growth runway given the benefit they offer their customers in terms of convenience and value, said White.

D.A. Davidson is expecting the U.S. market opportunity for ride-sharing to grow to four times the size of the historical taxi and limousine market, or roughly $105 billion.

See also: Meet the ‘O.G.’ Uber and Lyft drivers who could cash in on the IPOs

Where Lyft is lagging rivals is in the development of self-driving technology, partly because of its size and lack of scale, said the note. But tie-ups with self-driving partners can give it time to either address the issue of size, perfect its own technology or link up with a longer-term partner.

See also: Lyft IPO is being priced for perfection — and that’s not realistic

Related: Uber clears what looked to be an IPO roadblock with $20 million settlement

White is expecting Lyft to growth revenue by 56% to $3.4 billion in 2019 and to grow it another 30% in 2020.

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Uber vs. Lyft IPO: The Race to Go Public

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