Weakness in Uber and Lyft is an Opportunity

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Investors may want to pay close attention to Uber and Lyft.

Late last week, a California court struck down a measure that exempted these companies from a “state law requiring drivers to be classified as employees eligible for benefits and job protections,” as noted by USA Today.

In addition, according to The Wall Street Journal, “The companies don’t need to immediately change their way of doing business, but Friday’s ruling adds a wrinkle in their efforts to preserve their independent-worker models and serves as a setback in their years-long fight against the California law at the heart of the ruling.”

However, analysts say investors should buy the dip, with chances for a successful appeal.

For one, Mizuho analyst James Lee says the appeal process could take up to a year.  He also says Prop 22 will remain in effect, leaving drivers are independent contractors.  Until we hear more, Lee reiterated a buy on Uber with a $72 price target.  Bank of America’s Justin Post also reiterated a buy, noting, ““With Prop 22 winning in the 2020 election by a wide margin (5 9%/41%) and legal challenges to ballot initiatives in CA being fairly common, we expect many investors to see a solid basis for winning an appeal,” as quoted by Street Insider.