Anyone need a Lyft (LYFT)? It’s funny how such an ordinary question appears so out of place, but it is only a reflection of these surreal times. The ride sharing platform, as would be expected in these lockdown days, has endured a torrid time in 2020. Year-to-date, Lyft stock is down nearly 50%.
On Tuesday, Lyft disclosed it has reached an agreement with Enstar to effectively eliminate almost all of the company’s principal auto insurance liabilities concerning periods prior to October 2018. At investment firm Stifel Nicolaus, the news was received as a welcome development.
Scott Devitt, a 5-star Stifel analyst, said, “The agreement with Enstar effectively transfers Lyft’s primary auto insurance liabilities from the period of October 2015 to September 2018 to Enstar for a consideration of $465mm, with approximately 80% of the consideration paid for from Lyft’s restricted cash, cash equivalents, and investments that were previously held on Lyft’s balance sheet as collateral against these legacy claims. We view the transaction as a positive development that should effectively remove future volatility in the P&L related to changes to estimates for auto insurance liabilities in the pre-October 2018 period.”
Devitt doesn’t believe the transaction should impact Lyft’s liquidity position. The company exited 2019 with almost $2.9 billion in unrestricted cash, cash equivalents, and short-term investments, and despite the current macro environment, Devitt expects Lyft to see out 2020 with “a significant cash cushion even with significant bookings deterioration.”
Devitt keeps his Buy rating on Lyft, along with a $42 price target. The implication for investors? Possible upside of 91%. (To watch Devitt’s track record, click here)
Overall, the Street remains firmly on Lyft’s side. 21 Buys and 5 Holds add up to a Strong buy consensus rating. The average price target is $56.41 and could provide investors with upside of a considerable 156%, should it be met in the year ahead. (See Lyft stock analysis on TipRanks)
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