Ride share apps have replaced the traditional taxi business
Despite a big drop for the average stock today, shares of recent-IPO Lyft (LYFT) surged higher about 5 percent. This came on a recommendation at J.P. Morgan recommending the stock, citing the potential for rise to $86, a 57 percent boost from current prices.
The report further cites potential improvement as competition slows down in the space, and high-growth rates can be maintained.
While Lyft has yet to report earnings for the first time as a publicly-traded company, competitor Uber reported on Thursday. Despite losing $1 billion during the quarter, the numbers came in better than expected. Uber also expects to be able to lower its costs going forward as well.
Action to Take: Stick to the product, not the stock. Despite being sold as a tech name, Lyft is still an unprofitable, low-margin business. That may change after reporting a few quarterly earnings numbers, however.
A daring investor may want to look at the January 2020 $40 put, betting on further downside from here. At around $3.30 per contract right now, a drop in shares back to the post-IPO low could have 50-75 percent profits from here.
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