Why Shares of Lyft Are Soaring This Week

Key Points

• Waymo riders will eventually be able to hail Waymo vehicles on Lyft's platform in Nashville.

• Lyft will also manage Waymo's fleet in Nashville.

• The partnership shows that Lyft may be able to benefit from the self-driving revolution that is beginning to hit major cities across the U.S.

• 10 stocks we like better than Lyft ›

Since the close of trading last Friday, shares of the ride-hailing company Lyft (NASDAQ: LYFT) have traded nearly 19% higher as of 11:34 a.m. ET Friday. During the week, Lyft announced a partnership with the autonomous vehicle maker Waymo, received several price target increases from Wall Street analysts, and got some potentially good news on the legislative front in California.

Tapping into the autonomous trade

Earlier this week, Lyft announced a partnership with Waymo for the company's upcoming Nashville launch. By 2026, riders will be able to hail Waymo vehicles through the Lyft app. Additionally, a subsidiary of Lyft will manage Waymo's Nashville fleet, including vehicle maintenance, infrastructure, and depot operations. Waymo has long been partnered with Lyft's rival Uber, so this shows that Lyft may also be able to tap into the autonomous trade, which has driven Uber's stock to all-time highs this year.

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Jefferies Financial Group analyst John Colantuoni maintained a hold rating on Lyft but increased his price target from $15 to $22 per share. In a research note, Colantuoni said Waymo's decision to partner with both Uber and Lyft shows that the ride-hailing giants will benefit from essentially being distributors of autonomous vehicles, likely due to their large platforms and regulatory expertise.

In other news, analysts at Bernstein said the California state legislature may consider a pair of bills, one allowing drivers at ride-hailing companies to work out employment terms as a union while staying as independent contractors, the other that reducing the coverage that ride-hailing companies are required to provide for uninsured drivers. The second bill could dramatically lower expenses at Lyft, according to the analysts.

Should you buy the stock?

It's definitely been a good week for Lyft. After the big run, the stock now trades at about 18 times forward earnings. While the company has improved profitability this year, I would maybe take a breather right now. The autonomous trade is promising, but I want to see more evidence that Lyft can form more partnerships and make the autonomous industry a material driver of revenue growth.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool recommends Lyft. The Motley Fool has a disclosure policy.