Uber and Lyft are raising prices. One analyst says it could send Lyft’s stock 20% higher.

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  • Lyft was upgraded to “buy” with a price target of $60 by a team of analysts at Guggenheim Partners on Monday.
  • Shares rose more than 3% in early trading Monday.
  • The upgrade came after solid second-quarter earnings changed analysts’ perspective on the company’s potential, Jake Fuller of Guggenheim said in a note.
  • Watch shares of Lyft trade live on Markets Insider.

Lyft is getting a green light from a team of analysts at Guggenheim.

Shares of Lyft gained as much as 3.4% in early trading Monday after Guggenheim Partners upgraded the company to “buy” and established a price target of $60. That’s more than 20% above where shares are currently trading at $49.

The US ride-hailing space is improving, according to Jake Fuller, an analyst at Guggenheim. Specifically, Uber has raised its prices to offset losses in its other businesses, according to Fuller.

“Lyft and Uber are now public, and Uber needs margin from US ride hail to support efforts internationally and in the highly competitive restaurant delivery business,” he wrote.

That’s allowed Lyft raise its prices and cut back on rider incentives, clearing its path to profitability.

Based on Guggenheim modeling, Lyft could be profitable in 2021 and rake in $1.5 billion in profit by 2023 – a big milestone for the newly public company.

Lyft’s performance over the last two quarters has changed the Guggenheim teams’ perspective on the company, Fuller wrote. In its first earnings report as a public company in May, Lyft said that it expects 2019 to be its biggest year for losses. Shares whiplashed after the report, which showed robust growth in active riders and revenue per active rider against a steep loss of $211.5 million.

In its second-quarter earnings release, Lyft handily beat Wall Street expectations for the quarter, sending shares up as much as 10% in after-hours trading. Higher fares will offset some of the losses expected for the year, Lyft said in the second-quarter report. The company also raised its guidance for the year, which boosted investor optimism in the ride-hailing company.

Shares of Lyft are down 35% year to date.

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Markets Insider