Lyft Stock Falls After BofA Downgrades On Autonomous Vehicle Risk, Retail’s Bearish

Lyft Inc (LYFT) stock slumped 11% on Thursday after BofA double downgraded the stock to ‘Underperform’ from ‘Buy.’

The brokerage also cut the price target for the ride-hailing firm to $10.50 from $17.50. The new PT implied an 18.9% downside to the stock’s last close.

BofA analysts noted that the downgrade was due to substantial autonomous vehicle (AV) risk, primarily due to Google-unit Waymo’s expansion in San Francisco and Los Angeles alongside a lack of scalable AV partnerships for Lyft.

The brokerage said that Lyft is more exposed to Waymo than its rival Uber as 20% of its bookings are generated in California, compared with less than 10% for Uber.

BofA also said that Lyft could lose more market share to Waymo as the latter expands further in Los Angeles and San Francisco.

“We still see long-term potential for Lyft in the AV ecosystem, but given its still-nascent partnerships, we are losing confidence in near-term upside,” the brokerage noted.

Wells Fargo also cut the PT for Lyft to $13 from $14 and projected second-quarter gross bookings guide modestly below consensus. The brokerage expects a hit after the company’s partnership with Delta Airlines ends.

In March, Lyft said it would begin rolling out autonomous vehicles as soon as this summer. The company has signed agreements with partners like May Mobility, Mobileye, and Marubeni to do so.

Retail sentiment on Stocktwits moved to ‘bearish’ (38/100) territory from ‘neutral’(47/100) a day ago, while retail chatter was ‘low.’

One retail user likened the move by BofA as backstabbing on a “Red Day.”

While another bullish investor said, “In some ways, an economic slowdown will bring in more drivers and reduce wait times.”

Lyft shares have fallen 12.2% year-to-date (YTD).

According to media reports, activist investor Engine Capital nominated two director candidates for Lyft’s board in March. The hedge fund reportedly wants a strategic review, improved capital allocations, and the elimination of Lyft’s dual-class share structure.

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