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Wall St. analyst has a bullish reputation before the IPO

Lyft has just received its first buy recommendation from a Wall Street company – and the stocks have not even started trading.

D.A.. Davidson analyst Tom White initiated Lyft's coverage with a buy recommendation and a target price of $ 75. This represents a 15% premium over the mid-range price range of $ 62 to $ 68 expected at Lyft's initial public offering.

The optimistic outlook "demonstrates the impressive impact of LYFT on recent market share gains and momentum in the US, continued growth / expansion of the wider ride-sharing market and the reasonable EV / sales multiple of the stock," White wrote a report released on Tuesday.

With an expected price of $ 65 per share, Lyft is valued at approximately 5.4 times the enterprise value in relation to sales, which is reasonable given the growth profile of Lyft, "said White Price target of $ 75 is based on a 6.4x enterprise value compared to 2019 revenue, White added.

Lyft, the # 2 US ride sharing company behind Uber, has It has increased its market share from 22% to 39% in the last two years, with US consumers spending around $ 1.2 trillion on passenger transport each year. "The Ride Share industry still has one men Growth drivers whose benefits in terms of convenience, value, and payments extend the scope of the traditional taxi market that is currently being disrupted. "White said. The US market opportunity for passengers could increase to about $ 105 billion by 2029, or about four times the size of the historic domestic market for taxi and sedan vehicles.

FILE PHOTO: A car with a Lyft logo in the window drives one Street on which the company is preparing for the upcoming IPO in New York (USA) on March 19, 2019. REUTERS / Lucas Jackson / File Photo

Downside risks

However, the upcoming listed companies harbors inconvenience Downside risks The financial losses have intensified in recent years. Lyft, which issued its IPO prospectus in early March, reported a net loss of $ 911.3 million for the 2018 fiscal year. This was much steeper than the loss in 2016 and 2017, which was $ 682.8 and $ 688.3 million, respectively.

"It remains unclear whether Lyft can be profitable as a No. 2 player in US carpooling and still pay its drivers," said White. "Lyft has a more focused geographic profile and product portfolio than its biggest competitor, but Lyft appears to be out of profitability for several years."

Other risks include uncertainty over Lyft's long-term margin profile, positioning in the sector autonomous driving and the regulatory environment for the ride-sharing industry, White said.

Lyft started an IPO earlier this week, and stocks are expected to trade on the Nasdaq next week under the ticker LYFT. The company, which is working with the hailing mandate, said in a regulatory filing on Monday that it intends to sell more than 30 million Class A A shares for between $ 62 and $ 68 per share. Lyft's valuation may reach $ 23 billion, including the $ 2 billion that it plans to raise with its IPO along with the expected dilution and limited holdings, according to Monday's filing.

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