- Lyft shares have fallen more than 24 percent since the ride-sharing service's IPO on Friday.
- One Wall Street pro said it will take a "big leap of faith" for investors to back Lyft.
- Other analysts think Lyft is positioned to take advantage of the growing transportation-as-a-service business.
Lyft shares drifted lower on Tuesday amid concerns by some Wall Street pros that the newly public ride-sharing company is overvalued.
Seaport Global analyst Michael Ward said in a research note that it requires a "big leap of faith" for investors to back Lyft, according to Bloomberg. The company's stock price slipped 2 percent in morning trade after sliding nearly 12 percent on Monday, the company's mere second day as a public company following its high-profile last week. The shares are down more than 24 percent from their high on Friday of $88.60.
The stock's decline has lopped more than $3 billion off Lyft's market capitalization, which now stands at $23 billion. In terms of value, that still ranks Lyft about transportation industry stalwarts such as United Continental and American Airlines.
Investor demand for the initial public offering was strong, with boosters pointing to Lyft's accelerating growth — its revenue doubled last year to $2.2 billion and its ridership surged.
Yet while Wall Street is bullish about the long-term prospects for Lyft and for Uber, the largest ride-hailing company, analysts said generating profits in the short term will be tough. Other challenges include a murky regulatory environment and the industry impact of self-driving cars. The company has lost more than $2 billion since 2016 and racked up $3 billion in debt; it has yet to turn a profit.
Lyft's performance on the public market will be closely watched by other growing tech companies that were expected to list their shares this year, including Uber, social media company Pinterest and messaging software maker Slack Technologies.
"While we are bullish on the long-term opportunity for Lyft with robust growth prospects as the #2 player in a $1 trillion transportation-as-a-service market and the future of mobility, our concerns remain the vague path to profitability and the current valuation with no true public [comparisons]," Wedbush Securities analysts told clients in a note on Tuesday.
Only 18 IPOs have been priced in the first three months of 2019, down 50 percent from a year ago and the slowest deal pace in three years, according to Renaissance Capital.
Another big IPO in the first quarter, from apparel company Levi Strauss, has fared better. Shares of the 166-year-old jeans brand have risen 34 percent from the March 21 offer price.