Shares of ride-hailing firm
Lyft
and food-delivery firm
DoorDash
were rising Monday after a Wall Street analyst said a potential partnership would be largely beneficial.
RBC Capital Markets Brad Erickson upgraded both
Lyft
and DoorDash stock to Outperform from Sector Perform, and increased the respective price targets to $23 and $175, from $17 and $130.
Shares of Lyft were rising 6.2% to $17.37 while DoorDash stock was up 5.2% to $134.10. If DoorDash—which was the best performing stock in the Nasdaq 100 Monday—maintained these levels, it would be the stock’s highest close since Jan. 12, 2022, according to Dow Jones Market Data.
“We do not believe DASH would buy LYFT, however, we see an opportunity to work together vs. a common competitor that could create significant value for both,” Erickson wrote on Monday. That common competitor being ride-sharing firm
Uber Technologies,
which offers food delivery with its Uber Eats unit.
DoorDash is well aware of Uber, whose $161 billion market capitalization is about three times bigger. In fact, three top DoorDash executives—Chief Operating Officer and President Prabir Adarkar, Chief Financial Officer Ravi Inukonda, and Chief Business Officer Keith Yandell—are Uber alums.
Both Lyft and DoorDash stock’s have been on a tear, respectively surging 68% and 128% over the last 12 months.
Lyft’s earnings report last month was clouded by headlines that the company released a typo in its press release that suggested 2024 margin expansion for adjusted earnings before interest, taxes, depreciation, and amortization was much larger than the actual outlook. In any case, the company still posted strong fourth-quarter financials as gross bookings jumped.
Erickson said that the improved execution of Lyft’s business “gives any potential partners greater confidence in being a sustainable competitor longer term.”
DoorDash also posted better-than-expected financials for its fourth quarter in February as gross order volume increased.
“A partnership with DASH makes enormous sense and becomes more probable, in our view, every quarter the business [Lyft] looks more stable relative to UBER,” Erickson said.
DoorDash declined to comment. Lyft didn’t immediately respond to a Barron’s request for comment.
Importantly, Lyft has an existing partnership with Grubhub, another food delivery service. This partnership was established in October 2020 and offers Lyft Pink members a free years of GrubHub+. Lyft Pink members get benefits like free priority pickup upgrades and special pricing.
Erickson said he doesn’t believe this is an exclusive partnership, leaving a door open for a potential deal with DoorDash.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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