Lyft stock is on a strong run after a positive earnings report. Shares of DoorDash have been hot for the past 12 months. Could the companies benefit by working together?
That's a question posed by RBC Capital analyst Brad Erickson. He led a team of RBC analysts that upgraded shares of both Lyft and DoorDash to positive outperform ratings in separate client notes on Monday. The analyst wrote that RBC is upgrading its outlook on the companies "separately ... and as potential partners."
Both companies already could prove undervalued separately, but also have an "intriguing" option in a potential loyalty partnership, Erickson added.
"We do not believe DASH would buy LYFT," Erickson wrote. "However, we see an opportunity to work together vs. a common competitor that could create significant value for both."
RBC upped its price target for Lyft stock to 23 from 17. RBC raised its target price for DoorDash to 175, from 130.
Lyft stock gained 4.5% to close at 17.08 Monday. DoorDash gained 4% to close at 132.40 on the stock market today.
DoorDash declined to comment on the note. Lyft did not immediately respond to a request for comment.
Lyft And DoorDash Competing With Uber
Both Lyft and DoorDash are competing with Uber, though in separate realms. Lyft has formed the lighter part of what Erickson called a "stable duopoly" in the U.S. ride-hailing market. Meanwhile, DoorDash has a larger share of U.S. food delivery than Uber Eats.
Yet Uber has a loyalty offering, Uber One, that offers discounts and perks for both food delivery and rides.
Erickson wrote that RBC is "intrigued at DASH's optionality to establish partnerships, particularly LYFT, which could drive significant incremental orders and put its loyalty program closer to equal footing with Uber."
DoorDash's DashPass loyalty membership offers fee-free delivery and other discounts and perks.
Beyond dreaming of a new partnership, Erickson said confidence in DoorDash stock is driven by his view that efforts to expand beyond North America and into new verticals are "stabilizing." And the company has shown resilience in overall order growth.
Last month, DoorDash stock slid after the company posted a wider-than-expected loss for its fourth quarter. But shares have since bounced back. DoorDash stock has gained 137% in the past 12 months and is trading at its highest levels since early in 2022.
Lyft Stock: 'Improving Competitive Position'
Meanwhile, Lyft is coming off a fourth-quarter earnings report that topped expectations. Lyft stock is up 25% since the start of the year and has gained 75% in the past 12 months. But it is still very much in Uber's shadow, with a roughly $7 billion market cap compared to Uber's nearly $170 billion.
Erickson wrote that Uber still has advantages for its size and scale. "However, barring a bigger consumer slowdown, we see no reason why both players can't continue to capture the underpenetrated ride hailing opportunity," the analyst's note added.
Lyft's "improving competitive position" affords it an opportunity to consider partnerships in food delivery, Erickson added.
Lyft already offers a loyalty membership program called Lyft Pink that includes discounts and priority pickups. It also includes access to Grubhub+, which offers free delivery on certain orders through Grubhub. But, Erickson wrote, Grubhub trails DoorDash for market share and Grubhub's business is focused in New York and Chicago.
Uber stock, meanwhile, was little moved in trading Monday.
