Lyft is to sell its self-driving technology unit. According to Reuters, the US ride-hailing firm will sell the unit for $550 million to Toyota. Lyft is to receive $200 million in cash upfront, with Toyota paying the remaining $350 million over five years.
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The sell-off will allow Lyft (LYFT) to eliminate the risk of developing expensive technology on its own. According to Reuters, the ride-hailing company will also be able to offload a cash-burning side of the business and, in return, focus on reviving its core divisions. Lyft is yet to confirm how it intends to invest funds from the divestment.
The sale will remove $100 million in annual net operating costs while allowing the company to focus on offering services such as routing, consumer interface management, and the maintenance of its partners’ autonomous vehicle fleets.
The acquisition is also of great benefit to Toyota (TM) as it paves the way for it to step up its automation ambitions. Toyota has been exploring its Level 2 automation driver assistance technology and in addition to the Level 5 acquisition, boasts a joint venture with Softbank Corp. and has close working relationships with ride-hailing services such as Chinese firm, Didi Chuxing.
Lyft shares are up 28.35% year-to-date after a 14% pop in 2020. (See Lyft stock analysis on TipRanks).
Yesterday, Needham analyst Bernie McTernan reiterated a Hold rating on Lyft. The analyst expects vaccine rollout to benefit Lyft’s ride-hailing business, which should allow it to surpass estimates.
“Also, the US is in a relatively better position than other areas around the globe (like Europe) regarding COVID infections and vaccination rates. LYFT’s domestic focus could be an advantage relative to a global peer like UBER,” McTernan wrote in a research note to investors.
Consensus among Wall Street analysts is that Lyft is a Moderate Buy based on 23 Buy and 9 Hold ratings. The average analyst price target of $70.61 implies 10.2% upside potential to current levels.
Lyft scores an 8 out of 10 on the TipRanks’ Smart Score rating system, implying that it could outperform market expectations.
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