Lyft (LYFT): Assessing Valuation After California Insurance Deal and Cost-Saving Agreement

Lyft (LYFT) just made a move that is catching investors’ eyes: a high-profile deal with California lawmakers to reduce insurance costs for ride-hail operators. The company expects to save $200 million on insurance, a significant operational win, and plans to share those gains with drivers through higher pay. By supporting new union rights for drivers in exchange for regulatory relief, Lyft is aiming to improve both its cost structure and relationships with its workforce.

This announcement comes following Lyft’s newly reported 11% revenue growth last quarter and its recent Free Now acquisition, which sets the stage for potential growth in Europe. Investors have been responding, as Lyft shares have climbed nearly 41% in the past month and stand up 59% over the past year. With momentum picking up after a few challenging years, the market is clearly reassessing what the company might be worth.

After this surge, could Lyft be turning a corner and inviting new buyers, or has the stock run ahead of its underlying improvements?

Most Popular Narrative: 10.7% Overvalued

According to the most widely followed narrative, Lyft's shares are currently trading above their fair value when benchmarks for future growth, margins, and profitability are applied.

The ongoing rollout and consumer adoption of autonomous vehicles, backed by new partnerships with tech leaders like Baidu and operational capabilities in both the U.S. and Europe, are expected to significantly expand Lyft's total addressable market, lower labor costs, and increase long-term gross margins and earnings.

Curious about the bold assumptions behind this valuation? The narrative is built around ambitious changes in how Lyft grows earnings and margins, plus a future financial target that rivals some of the fastest-growing players in tech. Want to uncover which future milestones could impact the stock's worth, and the real numbers driving this view? Dive in for the full story.

Result: Fair Value of $17.12 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, regulatory changes or tough competition in the ride-hailing space could quickly offset Lyft's progress and undermine these optimistic projections.

Find out about the key risks to this Lyft narrative.

Another View: Discounted Cash Flow Tells a Different Story

While the popular narrative sees Lyft as trading above fair value, our SWS DCF model produces a sharply different conclusion, pointing to substantial undervaluation. Could this mean the market is underestimating Lyft’s cash flow potential? Who is really right?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Lyft for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Lyft Narrative

If you have a different perspective or want to dig into the numbers yourself, you can craft your own personalized narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Lyft.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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