On the second day of trading after their much-anticipated stock market debut, Lyft shares have fallen below their IPO price.
Analysts are releasing their ratings of the ride-hailing giant’s shares, amplifying doubts about the money-losing San Francisco company that’s facing challenges galore.
“Following years of significant improvement, we believe market share gains and revenue growth are poised to slow as competitive pressures mount in the ride-sharing industry,” Consumer Edge Research analyst Derek Glynn wrote in a note to investors, according to Bloomberg. He set a $73 price target on Lyft’s shares, which is only a dollar higher than the $72 Lyft set for its shares, and much lower than the $87.24 the stock began trading at Friday.
Monday, Lyft shares were down about 10 percent to $70 in midday trading. They had soared about 20 percent on their first day of trading before losing steam and closing almost 9 percent higher Friday.
Lyft went public to much fanfare last week, becoming the first tech unicorn to go IPO this year and beating its biggest competitor, Uber, to market. Besides No. 1 ride-hailing company Uber, other Bay Area companies expected to go public this year include Airbnb, Slack, Pinterest, Postmates and Palantir.
It is not uncommon for companies to see volatility in their shares when they first go public. But Bay Area real estate agents, restaurants and others preparing for an uptick in business from IPO riches in this batch of market debuts might want to know that the stock market ride could be a bumpy one.
“We simply have to look too far out with too many big assumptions in order to make a case for the stock,” Guggenheim analyst Jake Fuller wrote in a note to investors about Lyft, in which he gave the company’s stock a Neutral rating, according to Barron’s.
Fuller suggested that the way to Lyft’s profitability could be through a self-driving future, which would reduce the company’s reliance on human drivers. But that future is uncertain, and fraught with regulatory and other hurdles.
Some analysts are more optimistic about the company’s prospects, pointing to the fact that despite losing $911 million last year, Lyft has increased its revenue and ride-hailing market share in the past couple of years.
“Investors are eager to get into these companies,” said Alejandro Ortiz, analyst at SharesPost, a San Francisco private-trading marketplace, adding that while Lyft and others may not be profitable, they are in an “asset class that’s high growth.”
“Venture capitalists and others who bought and sold Lyft shares on the increasingly liquid secondary markets prior to an IPO performed very well,” Ortiz said in an interview Friday with this news organization.