Lyft Stock Surges After Atlanta Autonomous Vehicle Launch, But Is the Price Justified?

Thinking about what to do with your Lyft shares, or whether it's time to get in? You’re not alone. After all, Lyft has made some serious moves lately that have both energized the bulls and made skeptics raise an eyebrow. Over the past month, the stock powered up by 34.6% and the year-to-date climb looks even stronger at 60.2%. Even the annual return is holding a solid 70.3%. All of this comes after a hefty rebound from pandemic blues and regulatory headwinds. But, the story isn’t entirely rosy. The last seven days saw a 3.1% dip, and if you zoom way back, five-year holders are still down 20.8% overall.

What’s driving this roller coaster? New headlines paint a picture of a company pushing into the future: from partnerships to launch autonomous vehicle services in Atlanta to California’s recent deal allowing Lyft drivers to unionize, regulatory and tech developments are keeping things interesting. There’s also a sentiment shift in the industry, as reflected in incremental price target bumps from analysts.

With all this action, it’s natural to wonder if Lyft’s price really matches its true value right now. Using a classic six-point valuation score, the company clocks in at a modest 2 out of 6 for being undervalued. That leaves us at an intriguing crossroads, suggesting upside in some areas and caution in others. Next, let’s break down the main ways analysts measure a stock’s value, and see if those numbers tell the full story, or if there’s an even better lens to use when sizing up Lyft.

Lyft scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Lyft Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and discounting them back to today’s dollars. This approach helps investors decide what a stock should be worth, based on what the business is expected to generate in real cash over time.

For Lyft, the latest reported Free Cash Flow is $923 million. Analysts provide detailed forecasts for the next five years, predicting continued growth. Simply Wall St extrapolates these forecasts into future years. By 2029, Lyft’s Free Cash Flow is expected to be around $718 million each year, with gradual increases in the following years according to these projections.

Using these estimates, the DCF analysis arrives at an intrinsic value of about $30.38 per share. This is roughly 28.0% higher than Lyft's current trading price, implying the stock is notably undervalued based on its future expected cash flows.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Lyft.

Our Discounted Cash Flow (DCF) analysis suggests Lyft is undervalued by 28.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Lyft Price vs Earnings (PE)

For companies that are profitable, the Price-to-Earnings (PE) ratio is a popular and practical way to compare a stock's price against the money it's actually making. Investors favor this metric because it connects the current share price to each dollar of earnings. This is a straightforward way to judge value, especially as soon as a company starts to turn a reliable profit, as Lyft now does.

What counts as a “fair” PE depends on how quickly the company is expected to grow and how risky the business is. Fast-growing companies or those with stable, predictable earnings can justify higher PE ratios, while more uncertain prospects usually warrant a lower multiple.

Currently, Lyft’s PE ratio sits at 96.42x, which is notably higher than the average for transportation industry peers (23.53x) and the broader industry itself (23.50x). Simply Wall St’s proprietary “Fair Ratio” refines this comparison. Taking into account Lyft’s unique earnings growth, profit margin, industry, size, and risks, their Fair Ratio for Lyft lands at 21.02x. This metric is especially useful because it adjusts expectations for the company’s specific context, not just the averages observed across peers or the industry.

Comparing the Fair Ratio and Lyft’s current PE, the shares are priced far above what would be considered fair given current fundamentals. It suggests investors are expecting significant future growth or improvement, but based on existing data, the stock looks overvalued by this measure.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Lyft Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative combines your story or perspective about a company, including your assumptions about Lyft’s future growth, risks, and margins, with the traditional numbers to create a personal, dynamic fair value estimate. Instead of relying purely on static ratios, a Narrative links why you believe in Lyft (or not), connects those beliefs to a forecast for revenue or earnings, and flows directly into a valuation you can compare to today’s price. Narratives are easy to use and always up-to-date on the Simply Wall St Community page, used by millions of investors to see, build, and share investment stories.

This tool helps you decide if you should buy, sell, or hold by clearly showing where your Fair Value stands versus the current Price, with instant updates as news, earnings, or forecasts change. For example, one investor may build a bullish Lyft Narrative with aggressive global expansion and AV adoption, pegging fair value near $28. Another, wary of competition and regulatory risks, might see Lyft as worth just $10; both positions are tracked as the underlying facts evolve.

Do you think there's more to the story for Lyft? Create your own Narrative to let the Community know!

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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