-Lyft's IPO banks give troubled stock a flurry of 'buy' ratings
(Corrects JPMorgan price target to $82, from $68, in paragraph
By Noel Randewich and Jasmine I S
April 23 (Reuters) - Lyft Inc received some badly
needed support on Tuesday, as analysts at banks that had worked
on its initial public offering urged clients to buy the
ride-hailing company's beleaguered shares.
Following the required 25-day wait for deal underwriters to
issue an investment opinion following an IPO, at least 10 of the
banks that brought Lyft public gave positive recommendations on
a stock that has slumped 30 percent from its opening price on
March 29, its first day of trading.
KeyBank appeared to be the only bank launching coverage on
Tuesday that did not recommend buying Lyft, instead assigning it
a "sector weight" rating and warning of slowing growth.
As of Tuesday, 14 out of 22 analysts covering Lyft
recommended buying the stock, seven were "neutral" and one
Lyft's stock slump since its IPO has raised concerns about
the valuation of larger rival Uber Technologies Inc as
it prepares to promote its own long-anticipated public listing,
expected next month.
Both companies have warned they may never become profitable,
making it difficult for investors to estimate how much they
might be worth.
"Uber's filing has added pressure, and we acknowledge that
the upcoming roadshow could create more near-term uncertainty,
but we believe Lyft continues to execute well," JPMorgan analyst
Doug Anmuth wrote in his research report, assigning Lyft a $82
price target. The stock was trading Tuesday afternoon at $60.79.
Before Tuesday, only banks that had not worked on Lyft's IPO
were permitted to offer recommendations on the stock, and the
balance of opinion in that group was decidedly more skeptical.
Just four of them had recommended Lyft's shares, while six
initiated the stock as a "hold" and one as a "sell."
Despite regulations that separate investment banking and
research operations, it is rare for analysts at banks that have
participated in an IPO to recommend selling that stock when they
issue their initial opinions.
Even after Tuesday's "buy" ratings, the stock dipped 0.5%.
Due to its lack of profitability and dual class share
structure guaranteeing insiders control of the company, Lyft is
not eligible to be included in the benchmark S&P 500 stock
index. But if it were, its poor average analyst rating would
rank it in the bottom 10% of the benchmark index, among
companies including Kraft Heinz Co and Gap Inc,
according to Refinitiv data.
"We expect steady deceleration in market growth and Lyft's
pace of share gain, which seems likely to prevent revenue and
adjusted EBITDA from meaningfully exceeding our expectations,"
KeyBank analyst Andy Hargreaves.
Piper Jaffray expected "solid near-term top line results,"
saying Lyft had been gaining market share in recent quarters,
but that the path to positive net income would be a "multi-year
journey." It initiated coverage with an overweight rating and
target price of $78.
Most of the analysts were confident of Lyft's long-term
fortunes, despite the competition from Uber.
Reuters has reported that Uber plans to sell around $10
billion worth of stock at a valuation of between $90 billion and
$100 billion. Its IPO is on track for some time in May.
Lyft has a stock market value of around $17 billion.
At least six of Lyft's underwriters, including Canaccord,
Cowen and JMP Securities, are also backing the Uber deal,
according to SEC filings.
(Reporting by Noel Randewich in San Francisco and Jasmine I S
in Bengaluru; editing by Bernadette Baum)
First Published: 2019-04-23 12:36:54
Updated 2019-04-23 20:33:14
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