RBC Capital reiterates Outperform rating on Lyft stock, citing growth opportunities

RBC Capital reiterated an Outperform rating on Lyft, citing robust revenue growth, expected profitability, and an attractive valuation (8.5x 2026 EBITDA), driven by strategic initiatives like the Freenow acquisition and strong cash flow supporting capital returns. This positive outlook coincides with Lyft's announcement that co-founders will step down from the board by August 2025 and convert Class B to Class A shares, eliminating the dual-class structure. Furthermore, Lyft projected Q3 gross bookings of $4.65B-$4.80B, exceeding analyst estimates, though some analysts maintain a cautious stance.

Analysis

RBC Capital has reaffirmed a constructive stance on Lyft, issuing an Outperform rating with a $21 price target, supported by the company's robust fundamentals and strategic initiatives. This optimism is underpinned by nearly 20% revenue growth over the last twelve months and a strong third-quarter gross bookings forecast of $4.65 billion to $4.80 billion, which represents 15% year-over-year growth at the midpoint and surpasses analyst estimates by 3%. RBC highlights Lyft's valuation as attractive, trading at 8.5 times estimated 2026 EV/EBITDA, and suggests its strong cash flow could support a larger capital return program. Strategically, the Freenow acquisition is seen as significantly enhancing Lyft's autonomous vehicle capabilities and facilitating international expansion. Concurrently, a major corporate governance change is underway, with co-founders Logan Green and John Zimmer set to depart the board by August 2025 and convert their super-voting shares, thereby eliminating the dual-class structure. While TD Cowen echoes the bullish sentiment with a Buy rating, Susquehanna remains on the sidelines with a Neutral rating and a lowered $14 target, citing concerns around European expansion.

Key Decisions for Investors

• Investors should weigh the compelling growth narrative, driven by accelerating bookings and a valuation deemed attractive by RBC, against the potential for increased shareholder buybacks fueled by strong cash flow.
• The planned elimination of the dual-class share structure by August 2025 is a significant governance improvement that could attract new institutional capital and reduce the stock's governance-related risk premium.
• It is crucial to monitor the execution of Lyft's international expansion strategy and any margin impacts, as the cautious stance from Susquehanna indicates that potential challenges in Europe could temper the otherwise positive outlook.