We recently compiled a list of the 7 Best Transportation Stocks To Invest In Now. In this article, we are going to take a look at where Lyft, Inc. (NASDAQ:LYFT) stands against the other transportation stocks.
At the September meeting, the Fed decided to lower its target range for the federal funds rate by 0.5%, bringing it down to 4.75%-5%. The decision is based on progress toward reducing inflation, which remains somewhat elevated but is moving closer to the Fed’s 2% target.
This could be a good sign for the transportation industry as lower rates reduce borrowing costs which could help the industry to access cheaper financing. Moreover, lower rates usually encourage consumer spending and could strengthen the supply chain as lower rates improve manufacturing and trade activities.
Fed Chair Jerome Powell noted that the U.S. economy remains strong, with inflation easing significantly from its peak to an estimated 2.2% as of August, while the core PCE rose 2.7%.
Powell emphasized that while the labor market has cooled, with slower job gains and a higher unemployment rate, it is no longer a source of inflationary pressure. The Fed expects inflation to reach 2% in the coming years. It also noted that wage growth has moderated.
Transport Industry Growth Drivers: Manufacturing Output and Consumer Demand
According to a report by Atradius, global transportation and logistics are expected to grow steadily in the coming years, due to rising manufacturing output and consumer demand. The sector is projected to expand by 3.8% in 2024 and 4.0% in 2025, supported by a European recovery, which will strengthen the industry. Decreased oil and fuel prices should relieve some cost pressures, while the impact of the Red Sea crisis will keep freight rates high but likely moderate with the addition of new ships.
The U.S. sector is expected to expand by 2.7% in 2024, supported by strong consumer demand and infrastructure investments, while China’s logistics industry is forecasted to grow by 4.8% due to rising imports, exports, and e-commerce demand. India’s transportation sector is set for significant growth at 12%, fueled by increased middle-class spending. Japan’s industry will see 5.9% growth, driven by recovering industrial production.
On the other hand, in the Eurozone, transportation growth will be slower, at 0.6% in 2024, before accelerating to 2.7% in 2025, while Germany faces a 1.3% decline in 2024. The UK’s transport sector remains challenged by weak business sentiment and labor shortages.
Our Methodology
For this article, we used transportation ETFs to identify nearly 40 stocks and then narrowed our list to the 7 stocks most widely held by institutional investors. The best transportation stocks to invest in are listed in ascending order of their hedge fund sentiment, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A ridesharing passenger and driver in a car, looking out the window in anticipation of their destination.
Lyft, Inc. (NASDAQ:LYFT)
Number of Hedge Fund Holders: 53
One of the best transportation stocks, Lyft, Inc. (NASDAQ:LYFT) has carved out a significant presence in the ridesharing sector in the United States and Canada since its inception in 2012. It operates a peer-to-peer marketplace that connects drivers with passengers through its user-friendly mobile application.
The platform facilitates a variety of transportation options, which cater to different customer needs with services like standard rides, Lyft XL for larger groups, and Lux for a premium experience. Additionally, the Express Drive program allows drivers to rent vehicles, broadening the scope of its offerings.
In Q2, 53 hedge funds had investments in Lyft (NASDAQ:LYFT), with positions worth $744.961 million. Appaloosa Management LP is the top investor in the company as of Q2. In the quarter, the firm increased its stake by 1603% to 7.96 million shares worth $112.25 million.
In the second quarter, the company achieved significant milestones, recording a remarkable 205 million rides, marking a 15% increase compared to the same period last year. The surge in activity was also seen in the growth of active riders, which reached an all-time high, showing a 10% year-over-year increase. The vibrant user engagement points to a platform that continues to attract and retain customers effectively.
Q2’s revenue soared nearly 41% from the previous year. The growth can be attributed to increased pricing strategies and the successful rollout of Lyft Media, which introduces advertisements from major brands into the app.
Significantly, the second quarter marked Lyft’s (NASDAQ:LYFT) first GAAP profitability, though modest at $5 million. The achievement is a sign of the company’s evolving financial health as it navigates a competitive market.
To further improve user experience, the company introduced a price lock feature designed to help riders avoid unexpected surge pricing. Moreover, it expects mid-teens growth in rides throughout the year, which indicates strong demand and effective operational execution.
At the Goldman Sachs Communacopia + Technology Conference in September, CFO Erin Brewer highlighted that the company has achieved double-digit growth in active riders for four consecutive quarters, alongside consistent increases in ride frequency.
Brewer commented that Lyft (NASDAQ:LYFT) is on track to deliver approximately $16 billion in gross bookings, which suggests that it is well-positioned to capitalize on current trends in the ridesharing market.
Overall LYFT ranks 6th on our list of the best transportation stocks to invest in now. While we acknowledge the potential of LYFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.