Lyft (LYFT) is a “stable duopoly” with a potential for a DoorDash (DASH) partnership, RBC Capital Markets said in a note to clients Monday.
The investment firm upgraded Lyft’s rating to outperform from sector perform and raised its price target to $23 from $17.
RBC said its latest driver supply analysis points to a “stable duopoly” compared with the past two years, which showed Uber (UBER) “flexing its structural advantage.”
“The improved execution of Lyft’s core business is foundational to our thesis in that it allows it to build scale and marketplace efficiency to grow down-market products which drive elasticity and gives any potential partners greater confidence in being a sustainable competitor longer term,” RBC analysts said.
A partnership with DoorDash “makes enormous sense and becomes more probable,” RBC said. The analysts estimate mid-single-digit to mid-teens of additional orders is possible, along with a 22% revenue or rides headwind, which could likely be outweighed by higher frequency member usage and incremental gross profit dollar benefit, according to the note.