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HEAD & SHOULDERS


Countdown to Lyft-Off?

06/21/19 12:50:20 PM
by Matt Blackman

Since its IPO debut open of $87.24 on March 29, ride-share company Lyft stock has struggled. Could the stock finally be getting ready to launch?

Security:   LYFT
Position:   Buy

In its latest earnings report on May 7, 2019 Lyft reported an adjusted loss per share of $9.02. While better than the $11.40 per share loss in the same quarter the year before, the company has a long way to go before earning a profit.

Still, after taking an initial 45% hit which dropped the stock into the $47 range, the stock has managed to post a commendable recovery since, posting a bullish inverse Head & Shoulders pattern with break out above the 20-day volume moving average on June 15 as the stock broke above its H&S pattern neckline (see Figure 1).

Figure 1. Daily chart of Lyft showing the bullish inverse Head & Shoulders pattern.
Graphic provided by: Freestockcharts.com.
 
The H&S pattern has a minimum projected target (arrived at by subtracting the lowest price $47 from the neckline at $63 and adding the difference to the breakout) of $79. Ideally, a rally followed by a retest of the neckline would help build a more robust base. A drop below the neckline on above average volume would essential invalidate the bullish pattern.
It is interesting that Lyft managed to IPO ahead of competitor Uber, which went public on May 10 but has since fared better, and is above its opening price of $42 (see Figure 2).

Figure 2. Daily chart of UBER since going public.
Graphic provided by: Freestockcharts.com.
 
From a positive perspective, LYFT is now about seven years old, has recently partnered with self-driving car company Waymo, taking the company one step closer to the all-important goal of automated driving, and is continuing to grow its user base to 20.5 million, up from 14 million in Q1 2018.

On May 23, Lyft also announced a partnership with Mastercard (MA) to launch the Lyft Direct Debit card designed to cater to Lyft's drivers to help them more easily manage the financial side of their businesses and allowing them to tap their earnings immediately.

The benefits for Matercard are also compelling. According to a recent study by Mastercard together with Kaiser Associates, the "gig" economy, in which companies contract with independent workers, is expected to grow from $204 billion to $455 billion between 2018 and 2023.

Both ride-sharing and the gig economy are in their early days and there will undoubtedly be more competition going forward. But from a technical point of view, Lyft bears watching to see if it can finally build a strong base and launch higher.



Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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