Lyft share price falls 12% days after IPO debut

Lyft share price is down 12% just days after launching its IPO on Wall Street. The ridesharing app had a volatile run on the US stock market since its start in late March.

What analysts say about Lyft’s share price

Seaport Global Securities analyst, Michael Ward, said that Lyft share price is declining because it’s too soon to tell if its valuation is justified. Ward said that Lyft has to prove that its core customer base of millennials will only use ridesharing in lieu of owning cars.

‘In order to justify its current market valuation, investors need to take a big leap of faith that the millennials and later generations will forego ownership of a car and opt instead for reliance on a ridesharing service,’ said Ward.

Guggenheim analyst, Jake Fuller, said that the corporation has to address major problems to help its stock rise again. Fuller said that Lyft has to calm investors’ fears about whether Lyft can increase revenue growth and succeed with expansion into customers sharing bikes and scooters.

‘Key issues include limited visibility on the path to profitability, sustainability of revenue growth, scale of investments in bikes, scooters and self-driving cars, and valuation,’ said Fuller.

How Lyft’s share price is affected by losses

Lyft’s stock troubles are possibly a warning sign for Uber, another eagerly anticipated IPO for this year that isn’t yet profitable. As analysts noted, while Lyft generated high revenue of $2.2 billion, the company had losses worsen over the last two years, growing from $708 million in 2017 to $911 million in 2018.

Ward noted that high insurance costs and incentives to retain drivers add to the ridesharing company’s losses. These additional issues will weigh heavily on investors as they continue to evaluate Lyft stock.