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Barron's Lyft and DoorDash Should Partner for Growth, Analyst Says

Shares of ride-hailing firm Lyft and food-delivery firm DoorDash stocks were rising Monday after a Wall Street analyst said a potential partnership would be largely beneficial.

RBC Capital Markets Brad Erickson upgraded both Lyft and DoorDash stock to Outperform from Sector Perform, and increased the respective price targets to $23 and $175, from $17 and $130.

Shares of Lyft were rising 6.1% to $17.34 in Monday morning trading while DoorDash stock was up 3.7% to $132.17, and the S&P 500 index is 0.1% lower.

“We do not believe DASH would buy LYFT, however, we see an opportunity to work together vs. a common competitor that could create significant value for both,” Erickson wrote on Monday. That common competitor being ride-sharing firm Uber Technologies, which offers food delivery with its Uber Eats unit.

DoorDash is well aware of Uber, whose $161 billion market capitalization is about three times bigger. In fact, three top DoorDash executives—Chief Operating Officer and President Prabir Adarkar, Chief Financial Officer Ravi Inukonda, and Chief Business Officer Keith Yandell—are Uber alums.

Both Lyft and DoorDash stock’s have been on a tear, respectively surging 68% and 128% over the last 12 months.

Lyft’s earnings report last month was clouded by headlines that the company released a typo in its press release that suggested 2024 margin expansion for adjusted earnings before interest, taxes, depreciation, and amortization was much larger than the actual outlook. In any case, the company still posted strong fourth-quarter financials as gross bookings jumped.

Erickson said that the improved execution of Lyft’s business “gives any potential partners greater confidence in being a sustainable competitor longer term.”

Newsletter Sign-up DoorDash also posted better-than-expected financials for its fourth quarter in February as gross order volume increased.

“A partnership with DASH makes enormous sense and becomes more probable, in our view, every quarter the business [Lyft] looks more stable relative to UBER,” Erickson said.