Investors Should Wait to Take a Lyft

We have initiated coverage of Lyft with a narrow moat rating and a fair value estimate of $72 per share. Lyft became a public company, selling 30.8 million shares at an IPO price of $72 per share on March 29, 2019. The IPO price is in line with our fair value estimate and we would recommend a wider margin of safety before investing in this very high uncertainty name.

Founded in 2012, Lyft has emerged as the number two ride-sharing player in the U.S. market. In our view, Lyft warrants a narrow economic moat and a stable moat trend rating, thanks to the network effect around its ride-sharing platform and intangible assets associated with rider, rides, and mapping data, which we think can drive Lyft to profitability and excess returns on invested capital in the future.

In contrast to Uber, Lyft is not focused on food transportation or logistics. We like Lyft's relatively narrower focus on consumer transportation but still note that Uber has an edge on Lyft in terms of an earlier start, higher market share, and a stronger network effect around its service.