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Lyft Inc Class A LYFT

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Lower California Court Rules Prop 22 Unconstitutional; Firms Will Appeal; Uber, Lyft Undervalued

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

On Aug. 20, a California state Superior Court judge ruled in favor of a petition filed by a labor union and some drivers demanding that Proposition 22 be ruled unconstitutional. This decision will not affect the operations of the network firms we cover, including Uber, Lyft, and DoorDash, as Proposition 22, which defines these firms' workers as contractors, remains applicable while the ruling is appealed. While the outcome of the appeal is uncertain, we think the strong support for the ballot measure in the November 2020 election, along with the California Supreme Court’s refusal to hear the case earlier this year, could sway the outcome in favor of Proposition 22. We also expect the appeals process in California to be a lengthy one, which could favor the firms’ efforts to work with other states’ lawmakers or create similar but amended or customized ballot initiatives. We are maintaining our $69, $63, and $142 fair value estimates for Uber, Lyft, and DoorDash, respectively. We believe legal risks are more than priced into Uber and Lyft shares, both of which we view as attractive. DoorDash remains overvalued, in our opinion.

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Company Profile

Business Description

Lyft is the second- largest ride-sharing service provider in the U.S., connecting riders and drivers over the Lyft app. Lyft recently entered the Canadian market in an effort to expand its market outside the U.S. Incorporated in 2013, Lyft offers a variety of rides via private vehicles, including traditional private rides, shared rides, and luxury ones. Besides ride-share, Lyft also has entered the bike- and scooter-share market to bring multimodal transportation options to users.

185 Berry Street, Suite 5000
San Francisco, CA, 94107
T +1 844 250-2773
Sector Technology
Industry Software - Application
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Speculative Growth
Employees 4,675