Lyft ‘s latest earnings report underscores why Uber is the stock to own in the ongoing battle between the two ridesharing companies, according to Evercore ISI. Analyst Mark Mahaney downgraded Lyft’s stock to in line from an outperform rating, calling the company’s weak active rider growth and market share loss to Uber “very concerning” in a note to clients Monday. “Valuation is very reasonable here (1X EV/Sales and 9X EV/EBITDA), and we continue to believe strongly in the secular and profit growth potential of Ridesharing,” he said. “But on this thesis, we’d much rather own UBER, given its superior scale and business model & geo diversification. Hence the downgrade.” Lyft on Monday posted a beat on earnings for the third quarter, but revenue that fell short of analysts’ expectations and a decline in active riders. Shares fell nearly 19% in premarket trading. To be sure, Lyft saw one of its strongest periods of active driver growth over the last year, Mahaney noted. That said, Lyft did lose some market share to Uber as the company rolled out temporary driver incentives. Along with the downgrade, Mahaney slashed his price target on the stock to $18 from $41 a share. The new target still suggests shares could rally roughly 27% from Monday’s close. Looking ahead, Mahaney called Lyft’s fourth-quarter outlook “soft,” noting that he expects slower year-over-year revenue growth. Consumer weakness in 2023 will also weigh on the company in the months ahead, he said. “Our long thesis was based on our belief that LYFT’s fundamentals would benefit as a late-cycle rideshare recovery name,” he said. “We believed that the company’s substantial exposure to West Coast markets and to shared rides would power strong rider and revenue recovery in H2:22. This may still happen and there may simply be a delay here, but the notably weak growth in Q3 active riders is very concerning to us.” Lyft shares have tumbled roughly 67% this year. By comparison, Uber’s stock is down 34%. — CNBC’s Michael Bloom contributed reporting
