Shares of Lyft were down 4 percent in premarket trading Tuesday as the stock enters its third day on the public market.
The stock ended its second day of trading at $69.01, below its IPO price of $72 in an oversubscribed offering. Lyft's market capitalization now lies below $20 billion after ending its first trading day at $22.2 billion.
Analyst skepticism sent the stock down further Tuesday, with Seaport Global Securities initiating coverage of the stock with a sell rating and 12-month price target of $42 per share.
"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," the analyst wrote in a note Tuesday morning. Instead, he said ride-sharing will continue to be used as a "convenient supplement."
Lyft's stumble may be troubling to some investors, but based on previous tech stock debuts, it's too early to tell what this first week will mean for the stock. Snap debuted in 2017 with a $24 billion valuation, but has slid to just $15 billion. Meanwhile, Facebook's stock plunged 11 percent on its second day of trading in 2012 after being valued at over $100 billion in its IPO, but today the company is worth more than $481 billion.
Still, other tech companies will be looking to Lyft's performance and the public reaction as they prepare their own public offerings. Lyft's rival Uber is expected to drop its S-1 this month and go public a few weeks after that. And a number of others, including Slack, Pinterest and Zoom, are expected to hit the public market this year as well.
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