If you ask the professional analyst community about ride sharing companies lyft(NASDAQ: Lift)they will collectively tell you that the stock price may be strong. At the time of writing, the average price target for analysts is $18.69 per share, according to 32 analysts tracked by Tipranks. This shows an almost 40% increase from where you traded at the time of this writing.
That said, the analyst community is often wrong. And I believe it is again wrong regarding Lyft’s price targets. But I don’t mean that in the way you might think.
I don’t think analysts are like that That’s allWe estimate the potential for LYFT investments today. On the contrary, I believe there are a lot of it Higher It’s a better chance than it gets trust, and I believe it Lyft Stock is a purchase today.
I will not deny that Uber Technology(NYSE: Uber) This is an 800 pound gorilla on board. However, Lyft ranks second in the US and benefits from the ongoing adoption trend. Generally speaking, ride space continues to gain ground. And the growth in the industry helped Lyft set an active rider record in the third quarter of 2024.
In the third quarter, Lyft had 24.4 million active riders, up 9% from the previous year. The company also set ride records during the quarter. There were 217 million vehicles in the third quarter, an increase of 16%. Therefore, these metrics clearly show two things: Lyft attracts more users, and these users often ride Lyft.
They are good underlying business trends. However, Lyft’s finances are also moving in a positive direction. CEO David Risher took over in April 2023. This chart clearly shows that something had happened around that time.
As is clear from the charts, Lyft’s new CEO was serious Free cash flowand the company quickly improved. Today, it is for the first time in its history that free cash flow is positive.
In summary, Lyft’s business adoption level is encouraging, growing and profitable under new management. These things provide a good start to solid investment papers.
As for ratings, Lyft looks like a screaming bargain. Compared to Uber, Lyft stocks are valued at over 60% cheaper. This is true when measuring the valuation of a sale (P/S) from price and a free cash flow valuation from price.
The kicker here is that Lyft’s revenue is growing faster than Uber’s revenues now. High-growth businesses typically have a higher reputation. However, as the chart shows, Lyft is both high growth and inexpensive, and is a rare combination.
Think of this: if Lyft stock jumps 40% today – price targets and inline from analysts – still Trade Uber stocks at substantial discounts. Therefore, Lyft can argue that Lyft is significantly valuable today, based on subsequent financial results. But when we get ahead of what is possible in the next few years, it’s really interesting for investors.
Lyft is about to do a few things in the coming years. But what I would like to mention is digital advertising. It’s just started right now, but the company believes it could become a $400 million business in 2027. This is not outrageous. Consider that Uber achieved a $1 billion run rate in digital advertising within two years of launch.
Certainly, Uber is much bigger than Lyft, so it’s unreasonable to expect Lyft to scale that big and not too fast. But I believe it can actually expand to $400 million in three years. For perspective, this ad revenue target works every quarter, about $4 per active rider. This is not a guaranteed result, but it is certainly achievable.
Importantly, digital advertising could be a major growth driver for Lyft over the next few years, and this revenue stream is a high margin. This could potentially increase Lyft’s free cash flow even higher. In fact, management covers $900 million in free cash flow in 2027. This is 40% higher than the 12-month free cash flow in the third quarter.
Compared to Uber, Lyft is now significantly underrated based on subsequent numbers. However, over the next few years, management is focusing on meaningful growth. In other words, inventory will be even more attractive in the future. So I think Lyft Stock is today’s overwhelming purchase.
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