Lyft’s (^LYFT) stock could use a lift.
After beating ride sharing rival Uber to the market in an initial public offering that raised more than $2 billion, Lyft’s stock cratered in its 2nd full day of trading even as the broader market surged. On Monday, Lyft’s shares tumbled as low as $67.78, ending the session well below its IPO price of $72 and down more than 11% from Friday’s close.
Lyft’s stock began trading close to $90 on Friday, but retraced those gains as investors took profits — and that selling quickened on Monday. The stock’s downward trend suggests that some investors are having buyer’s remorse amid a “stampede” of hot closely held companies flooding markets with newly liquid shares.
Lyft is also trying to mollify a growing mass of disgruntled drivers, who are advocating for higher pay. Lyft is planning to use part of the IPO’s proceeds to offer cash bonuses to some of their “most dedicated” drivers, in addition to a package of perks that include free banking, car rentals and maintenance/repair.
Meanwhile, the competitive landscape is being steadily transformed by the industry’s push toward autonomous driving, and analysts are already warning about the hype surrounding Lyft’s offering.
Analysts at Guggenheim Securities, which initiated coverage on Monday with a “neutral” rating, said that while excitement surrounding Lyft was understandable, “we simply have to look too far out with too many big assumptions in order to make a case for the stock.”
With Uber and Google’s (^GOOG) autonomous car project, Waymo, ramping up the pressure, Wedbush noted last week that an “arms race” will create a number of uncertainties for Lyft.
In the most pessimistic scenario for the company, “regulations on the ridesharing industry become much more strict and cause take rates to decline sharply, Uber is able to attract more drivers/riders while smaller players Juno and Via take share,” said Wedbush, which rates the stock at “neutral.”
Javier David is an editor for Yahoo Finance. Read more:
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