Lyft is positioning itself for a larger role in the global rideshare market, even as analysts remain divided on its near-term outlook amid rising competition and macroeconomic uncertainty.
A new strategic acquisition, coupled with growing ridership and improving margins, underscores the company’s ambition to rebound from a turbulent few years.
On Tuesday, Lyft announced it would acquire European ride-hailing service FreeNow from German carmakers BMW and Mercedes-Benz for approximately €175 million ($197 million) in cash.
The deal, expected to close in the second half of the year, marks the San Francisco-based company’s most significant international expansion to date.
FreeNow operates in more than 150 cities across nine European countries, and Lyft said the acquisition would nearly double its addressable market to over 300 billion annual personal vehicle trips.
Once the integration is complete, the combined platform will span 11 countries, including the US, Canada, and key European markets.
Riders will eventually be able to use either app seamlessly across regions.
Acquisition of FreeNow is not without challenges
FreeNow’s micromobility services, especially its fleet of e-scooters, are viewed as a useful addition for enhancing customer convenience and choice.
While the acquisition opens new doors for Lyft, it also brings a set of challenges.
Lyft’s push to expand in Europe by targeting the offline taxi market will likely run into stiff competition from established players like Uber and Estonia-based Bolt Technology, both of which maintain a significant presence across the continent.
At the same time, evolving European regulations are requiring ride-hailing companies to improve driver benefits, including guarantees for minimum wages and paid holidays.
These changes are also reshaping pricing models to ensure fair and transparent compensation for drivers.
In response to these regulatory demands, Bolt recently rolled out new benefits for its UK drivers, including holiday pay and minimum wage guarantees.
From a financial standpoint, investors should be aware that Lyft’s current ratio stands at 0.76, indicating the company’s short-term liabilities outweigh its readily available assets.
Oppenheimer initiates coverage of Lyft due to higher ridesharing prospects
The announcement comes amid cautious optimism from analysts.
On Wednesday, Oppenheimer initiated coverage of Lyft with an outperform rating and a $15 price target.
The firm highlighted long-term trends such as declining car affordability and demographic shifts, with younger frequent users entering adulthood, making ridesharing increasingly attractive.
“Ridesharing will increasingly become a more enticing option as the cost of car ownership rises,” Oppenheimer wrote.
The firm pointed to Lyft’s growing driver supply, which has pushed down fares while maintaining stable active rider and trip frequency growth.
Features like Price Lock and a strategic partnership with DoorDash have also supported higher user spending.
Additionally, cost-cutting efforts have given Lyft “significant” earnings leverage, Oppenheimer said.
The company has reduced headcount by 34% since 2022, helping improve its EBITDA profile even as it remains priced at a discount to peers like Uber.
Waymo competition casts a shadow over the outlook
Still, not all analysts are convinced. Earlier this month, Bank of America Global Research double-downgraded Lyft to underperform from buy, citing intensifying competition from Alphabet’s Waymo.
The self-driving unit has grown rapidly, and Lyft’s higher exposure to West Coast markets, particularly San Francisco and Los Angeles, makes it more vulnerable to Waymo’s autonomous fleet than Uber.
BofA analyst Michael McGovern also cut Lyft’s price target to $10.50 from $17.50, expressing concern over the company’s “still-nascent” autonomous vehicle partnerships.
While Lyft has the potential to make ground in the AV space, it likely will occur over the long term, McGovern said, also pointing to a lack of scalable AV partnerships in the near future.
“We are losing confidence in near-term upside,” he wrote, even while acknowledging Lyft’s potential long-term role in the AV ecosystem.
Meanwhile, Wedbush on Tuesday maintained a neutral rating on Lyft but trimmed its price target from $16 to $13, adding to the mixed views on the company’s trajectory.
Lyft’s average analyst rating remains Hold, with a mean price target of $15.98, according to FactSet.
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