Shares of prominent ride-hailing companies Lyft and Uber Technologies have taken a hit as skeptical analysts weigh in on the future prospects of these businesses.

Analyst Downgrades Lyft and Raises Stock Price Target

According to Nomura analysts Anindya Das and Masataka Kunugimoto, Lyft's outlook is less favorable than initially anticipated. Consequently, they have downgraded Lyft's rating from Neutral to Reduce. However, despite this revision, the analysts have revised their estimates for earnings and revenue, resulting in an increase in the target stock price from $11.70 to $13. This update was provided in a report released on Friday.

Analysts Adjust Uber's Rating and Raise Price Target

In a separate report, the same Nomura analysts revised their rating on Uber from Buy to Neutral. Despite this revision, they have raised the price target for Uber's stock from $59 to $62.

Stock Performance in Pre-Market Trading

As news of the analyst reports circulates, Lyft stock has experienced a 3.4% decline in premarket trading, reaching $15.01. Similarly, Uber shares have dropped by 1.5% to reach $62.20. On the other hand, futures on the S&P 500 remained flat.

Challenges Ahead for Lyft

The Nomura analysts cited concerns surrounding Lyft's ability to continue increasing its take-rates. Take-rates refer to the portion of a fare that Lyft receives as commission. This limitation arises due to the fact that drivers' operating expenses are rising at a faster pace than their earnings. Additionally, the analysts noted that Lyft lacks immediate solutions to offset the negative impact on earnings resulting from its bikesharing business.

Bright Outlook for Uber Post-Pandemic

On a positive note, the Nomura team expects the surge in travel demand prompted by the post-pandemic period to stabilize in the coming year. This stability may prove advantageous for Uber.

According to the analysts, "Once the current rebound in travel subsides, we think Lyft's subscale market positioning, and lack of cross-selling opportunities (unlike Uber), could constrain topline growth for the company."

Overall, it appears that Lyft faces potential challenges in the near future, while Uber stands to benefit from the eventual stabilization of travel demand.

Lyft Faces Challenges in Offsetting Moderate Growth

Lyft, a popular ride-sharing company, may face challenges in offsetting its more moderate pace of ridership growth by raising prices, according to analysts. They believe that Lyft would be constrained by the actions of its larger and more profitable competitor, Uber.

While Lyft's shares have soared by 32% in December and 41% this year, analysts have struggled to find sufficient reasons to explain this exceptional monthly performance. Growth stocks, in general, have been benefiting from the optimistic outlook that the Federal Reserve may begin to cut rates next year.

On the other hand, Uber has experienced a different story altogether. Its stock has risen by over 150% this year. From successfully scaling its business model to posting its first operating profit and being added to the S&P 500 index, analysts and investors have found numerous reasons to be optimistic about Uber.

However, the analysts caution that most of the catalysts for Uber's stock are already priced in, and they believe that it is fairly valued at the current price.

These perspectives from Nomura echo the sentiments of many Wall Street analysts. According to FactSet, 73% of analysts who cover Lyft rate the company as Neutral, while Uber boasts a Buy-rating ratio of 94%.

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