Roth upgrades Lyft, says business is stabilizing after Freenow deal

Investing.com -- Roth upgraded Lyft (NASDAQ: LYFT) to Buy from Neutral and raised its price target to $19 from $16, saying the company’s business is showing signs of improvement after a difficult stretch.

While second-quarter revenue came in slightly below expectations, Lyft reported record levels of rides and operating margins.

The company also added more new riders and said more trips were booked through its partner network, which includes United Airlines and Chase.

Roth said Lyft is in a better position heading into the second half of the year, helped by its acquisition of Freenow, a European ride-hailing service that adds nine new markets.

The firm expects that deal to support stronger growth in bookings and improve Lyft’s market position outside the U.S.

Lyft is also spending less to attract drivers and riders, helping profits improve. Its adjusted operating margin reached a record in the second quarter, and free cash flow turned positive. Lyft is also buying back stock and expects to cut further costs through 2027.

Still, the firm noted several risks, including the potential for pricing pressure from rival Uber (NYSE: UBER) and uncertainty over how much Freenow will contribute in the near term.

There are also questions around Lyft’s progress in autonomous driving, an area where Uber has a lead.

Even so, Roth said recent results point to a more stable business, and at current prices, the stock looks undervalued.

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