Lyft (LYFT) has drawn fresh attention after expanding its partnership with Curb in New York City, allowing riders to request licensed taxis in app. Investors are assessing what this means for usage and earnings quality.

Against this backdrop, Lyft’s share price has been under pressure this year, with a year-to-date share price decline of 28.25% and a 1-year total shareholder return that is roughly flat. This suggests recent momentum has been soft despite improving fundamentals and product updates like the Curb expansion.

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The recent pullback leaves Lyft in an awkward spot, where improving metrics and the Curb expansion tell one story and weaker share price momentum tells another. Do current valuation markers line up more with sentiment or the underlying business?

Most Popular Narrative: 24% Undervalued

The most followed narrative currently places Lyft’s fair value at $18.64, above the last close of $14.20, which frames the recent pullback in a different light.

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 (TAM), lower labor costs, and increase long-term gross margins and earnings.

Want to see how this story gets from today’s earnings to that fair value line? Revenue growth, margin reset and future P/E expectations are doing the heavy lifting.

Result: Fair Value of $18.64 (UNDERVALUED)

However, this Lyft narrative can be knocked off course if competitive pressure from Uber limits rider and revenue growth, or if tighter regulation materially lifts costs and squeezes margins.

Next Steps

If the mixed sentiment around Lyft leaves you on the fence, it makes sense to move quickly and evaluate the complete range of risks and potential upsides for yourself, starting with the 3 key rewards and 2 important warning signs.

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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.