Steer Clear: Analysts Slash Rating on Lyft Ahead of Earnings

MoffettNathanson analysts led by Michael Morton have lowered their rating on Lyft (ticker: LYFT) to Sell from Neutral, citing concerns about the company's performance ahead of its upcoming earnings report. The analysts have also cut their price target for Lyft from $10 to $7 in a recently published research report.

Shares of Lyft are currently trading at $9.34, down 1%.

In their report, the analysts expressed skepticism about the company's decision to stop providing disclosures on ride volume and gross bookings, stating that they have never believed in the notion that "less is more" when it comes to company disclosures.

While Lyft is expected to release its fiscal third-quarter earnings on Nov. 8 along with long-term guidance and potentially more information on bookings and volumes, the analyst team remains pessimistic about the company's prospects.

The analysts point out that Lyft is at a disadvantage compared to its competitor, Uber, when it comes to raising prices. They state that Uber, being more scaled, better funded, and more profitable, has shown more patience in raising ride-share prices and take-rates domestically, which has caused Lyft to lose significant market share. A take rate refers to how much a company makes from each booking.

The analysts also anticipate a sharp decline in gross margins for Lyft in the future as insurance costs outpace pricing growth. Moreover, they expect any long-term guidance provided by the company to fall below market estimates.

Lyft has had a challenging year so far, with its shares falling by 15%. Meanwhile, Uber Technologies (UBER) has experienced significant growth, with its shares soaring by 72%. In addition, Lyft recently faced a penalty of $10 million from the Securities and Exchange Commission for not disclosing a large stock transaction prior to its initial public offering.