Shares of Lyft fell for a second straight day after an analyst raised concern over the ride-hailing company's valuation.
Seaport Global Securities analyst Michael Ward initiated coverage of the stock with a sell rating and a 12-month price target of $42 a share. Ward's price target implies a 39.1 percent downside from Monday's close of $69.01. Lyft shares traded down 2.6 percent at $67.22 in the premarket. It priced its IPO Thursday evening at $72.
For Ward, the wildcard surrounding Lyft is its valuation. "In order to justify its current market valuation, investors need to take a big leap of faith that the millennials and later generations will forego ownership of a car and opt instead for reliance on a ridesharing service," he said in a note, adding he believes people will continue to own cars and use ride-sharing services as a "convenient supplement."
"While we believe the ridesharing market will continue to grow and expect LYFT to be a prime competitor, in our view, current valuations reflect an overly optimistic view of consumer behavior in the US," Ward said.
Ward's sell rating and Lyft's decline come a day after the company's stock dropped nearly 12 percent on Monday, its second day trading in the public market. Lyft celebrated its initial public offering on Friday, as the stock surged 8.3 percent.
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