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Jim Cramer issues buy call on Lyft, remains ‘pessimistic’ on Uber
CNBC’s Jim Cramer reversed course on Wednesday and issued a buy call on the stock of Lyft.Lyft, coming off an August lockup expiration, may have put in a bottom at $37.07 a share in October, he said, adding that the stock is attractive after the company saw two straight positive quarterly results.”That’s why I think…
CNBC's Jim Cramer reversed course on Wednesday and issued a buy call on the stock of Lyft.
Lyft, coming off an August lockup expiration, may have put in a bottom at $37.07 a share in October, he said, adding that the stock is attractive after the company saw two straight positive quarterly results.
“That's why I think Lyft is finally worth buying here,” the “Mad Money” host said.
As for the ride-hailing app's chief rival, shares of Uber are still hands off in Cramer's eyes. He's “pessimistic” about the multi-service platform's prospects.
The latter company's lockup period, where inside investors are barred from trading shares on the public market, ended on Wednesday and the stock shed another 3.85% of value during the session. The stock closed below $27 a share.
“It's still way too early to go bottom fishing in Uber. The market's being flooded with supply here,” Cramer said. “It's going to clear up, but that's what's happening.”
Lyft and Uber shares have traded virtually in tandem since coming public in the spring. Lyft's initial public offering priced shares at $72 apiece in late March. Uber's May IPO was $45 a share.
Each stock instantly traded negative after Lyft debuted on the Nasdaq Composite and Uber listed on exchanges in New York, rising incrementally from mid-May before losing more than 30% between August and October.
That's until “a funny thing” occurred, Cramer noted, which inspired him to change his tune on Lyft. Lyft surprised on its July and September quarterly reports and delivered a strong guidance for the fourth quarter. The stock is now up more than 15% to $49.92 from its lows.
Lyft now expects earnings before interest, taxes, depreciation and amortization, or EBITDA, to turn positive by the end of 2021, which triggered analysts to upgrade the stock and boost price targets.
EBITDA measures a company's overall financial performance.
“Sure, they're still losing money, but they've made major strides to get costs under control,” Cramer said. “Management's promise to deliver positive EBITDA by the end of 2021 now sounds credible.”
Uber's latest quarter was mixed, and the results were weighed down by its shipping and food delivery arms, Uber Freight and Uber Eats. CEO Dara Khosrowshahi does expect the company to become profitable in 2021, but Cramer still thinks the widely known ride-hailing platform has more kinks to work out before investors put money in the stock.
Uber set a new intraday low of $25.58 on Wednesday.
“The company has got 1.7 billion shares outstanding; about a billion of these shares just became tradeable today,” Cramer said. “Remember: Lyft got obliterated by its lockup expiration over the summer. I wouldn't be surprised if Uber's just having the same experience.”
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