While Lyft stock has been in a perpetual decline for the last year and a half, the company experienced a nice bump in the past month amidst acquisition rumors. There were a few days over the past couple of weeks where the stock experienced over 10% gains. The rumor mill was that GM was a possible buyer for the ride-sharing company. Twitter users were also pointing toward Ford as a potential buyer. This news presented what was perhaps a last-ditch hope that Lyft could ever compete with Uber.
But today, an analyst squashed these rumors – if not for good, at least temporarily. The response has manifested itself in a quick dropoff in Lyft’s stock price. Investors who were hoping to continue riding the wave up and sell their shares a bit higher – mitigating losses or somehow capturing some profits – can blame Bank of America analyst Michael McGovern. He claims “recent speculation may be more hype than substance.”
In looking at the last year for Lyft, stock prices have dropped over 70%. And after this news, the stock price has slid even further – down to under $15 at the time of writing this release. The 6% drop has investors wondering if now is the time to cut losses on Lyft and free up what’s left of their position for other plays. We’ve also seen speculative investors wondering if this is rock bottom for Lyft – and a good entry point for a value buy.
While Lyft reported better than expected second-quarter earnings, there is still not much for investors to get excited about. Moreover, the slowing economic cycle will only put an increased strain on Lyft as a company – which relies on a thriving economy.
All this considered, we’re going to take a look at Lyft’s stock through the VectorVest stock forecasting system. This will help eliminate any guessing games or emotions from your decision. Here’s what you need to know before making your next move…
Lyft Has Good Upside Potential Despite Poor Safety and Timing
VectorVest simplifies stock analysis by telling you everything you need to know about a stock with just three easy-to-understand ratings – which sit on a simple scale of 0.00-2.00. The closer to 2.00, the better – and vice versa. These ratings are Relative Value (RV), Relative Safety (RS), and Relative Timing (RT). And based on these three figures, the VectorVest system defines an overall VST rating for any given stock, at any given time – leading to a clear buy, sell, or hold recommendation. So, what’s the current state of Lyft?
- Good Upside Potential: the RV rating takes into account the long-term price appreciation potential of a stock – forecasted up to three years out. This is far superior to a basic comparison of price and value alone. As for Lyft, the RV rating of 1.21 is good on a scale of 0.00-2.00. Moreover, Lyft has a forecasted earnings growth rate of 47% – which is excellent. It’s worth noting, though, that VectorVest does deem the stock to be overvalued – even at this low price of around $15. The true value is closer to $7.
- Poor Safety: an indicator of risk, the RS rating takes into account the consistency and predictability of a stock’s financial performance, business longevity, debt-to-equity ratio, and other risk factors. And the current RS rating of 0.71 is poor. This is coupled with a very poor CI rating (comfort index) of 0.30 – suggesting an inability to withstand severe or lengthy price declines.
- Poor Timing: the RT rating analyzes a stock’s price trend – taking into account the direction, dynamics, and magnitude of a stock’s price trend in the short, mid, and long term. And, the RT rating of LYFT stock is currently 0.75 – which is poor. This suggests that the downward price pressure on Lyft stock will continue for the foreseeable future.
Taking these three ratings into account, the overall VST rating of Lyft is 0.89 – which is fair, but certainly below the average of 1.00. But does that mean it’s time to sell? Or should you hold Lyft a bit longer? The answer may not be what you expect – so get your free stock analysis here for a clear buy, sell, or hold recommendation for Lyft stock.
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VectorVest advocates buying safe, undervalued stocks, rising in price. As for LYFT, it has good upside potential – but that’s where the positive news ends – as it has poor safety and timing.
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