Lyft’s shares fell for a second straight day, just days after it debuted on the stock market under the symbol LYFT. Analysts have expressed concern over the company’s valuation.
Analysts initiated coverage of the stock with a sell rating and a 12-month price target of $42 a share. This implies a 39.1% reduction from Monday’s close of $69.01. The company’s shares declined 4.2% before closing at $68.76, down by 0.1%. Its IPO as of last Thursday was priced at $72.
For these analysts, the main concern is Lyft’s valuation. They believe that the company may have gone overboard during its IPO last week, expecting that people would forego their own vehicles in favor of ride-hailing services. While such services would continue to remain a convenient option, it’s highly unlikely that these services would entirely replace personal vehicles. As a result, investors may need to take a leap of faith in order to justify the current market valuation of Lyft.
Lyft sees service transportation market worth $1.2 trillion in the U.S. But analysts think this is overestimation and the said market may be valued at around $70 billion.
The company now with its much hyped valuation at more than $22 billion posted a net loss of nearly $1 billion in 2018 and is yet to disclose strategy for a turnaround.
Some analysts also initiated coverage of Lyft’s stock with a neutral rating over lack of realistic assumptions to support the stock.