A couple weeks into 2020, I recommended to InvestorPlace readers that they forget about Lyft (NASDAQ:LYFT) stock, suggesting they buy National Beverage (NASDAQ:FIZZ) or TreeHouse Foods (NYSE:THS) instead.
All three stocks were trading in the $40 range at the time. I argued that Lyft wasn’t expected to make money until 2021, and that was only if it perfectly executed its plan. In hindsight, we know that didn’t work out.
Since the beginning of 2020, the two stocks I recommended have delivered 30-month returns of 99% (FIZZ) and -18% (THS). LYFT stock has returned -66%. On a relative basis, they crushed Lyft.
Now trading around $15, I’d like to do it again. Investors should pass on Lyft. I’ve got two stocks with similar profiles worth considering instead.
LYFT Stock in 2022
A group of Lyft and Uber (NYSE:UBER) drivers are accusing the two companies of violating California’s antitrust and state law by fixing prices. The drivers want to lower their prices to be more competitive but allege the companies won’t let them.
At a time when it’s difficult to find workers, Lyft can ill-afford to get dragged into another battle with its drivers when it’s attempting to become a profitable company.
InvestorPlace’s Alex Sirois recently wrote about Lyft’s chase for profits. My colleague believes the company’s business model is flawed, making it nearly impossible to become consistently profitable. I couldn’t agree more. I thought so a year ago. Nothing has changed in this regard.
Lyft has raised its fares to combat its significant quarterly losses. It hasn’t worked. The number of rides was down 35% in the first quarter. Any revenue gains it made on price were more than offset by fewer rides.
Once upon a time, Lyft could rely on rising quarterly revenues to keep its share price afloat. Now that it’s unable to grow the top line, it’s switched its focus to the bottom line. Too little too late. The ride-hailing business is no longer the cost saver it once was.
In 2020, it had to execute flawlessly to hit profitability in 2021. That didn’t happen. Who knows if it ever will. Lyft stock is not worth owning despite its 66% haircut over the past 30 months.
21 Stocks That Analysts Like
To select my two alternatives to Lyft, I took the S&P 1500 and searched for stocks priced between $13.50 and $16.50 ($1.50 on either side of $15). That brought up 63 names. I then eliminated those stocks where analysts rated them hold or worse on average. That brings the possible options to 21. (LYFT stock is well-liked by analysts, as I’ll discuss later, but analyst approval is just one criteria to consider.)
My first selection from this cohort is Xperi Holding (NASDAQ:XPER). Xperi licenses intellectual property to the entertainment and semiconductor industries. It has more than 11,000 patents and applications and plans to spin out the IP business under the name Adeia sometime in the fall.
In Q1 2022, this side of the business had revenue of $138.5 million. Its product business generated $118.9 million in revenue. XPER stock currently trades at around $14.47. Its stock is down 32% over the past year. Xperi currently trades at 1.62 times sales, its lowest multiple in a decade. It’s a much better value play than Lyft and it makes money.
The second alternative is Xenia Hotels & Resorts (NYSE:XHR) is a real estate investment trust that owns 34 high-end hotels with 9,814 rooms in 14 states. With Americans tired of being stuck at home for the past two years, people are traveling like they haven’t in some time.
Between January and March 2022, the REIT’s occupancy went from 44.1% to 69.2%. Its average daily rate (ADR) rose around $40 to $273.52, and revenue per available room (RevPAR) increased from $102.92 to $189.36.
If you’re looking for a quality stock in the $15 range, I would pick either of these over LYFT stock.
Why You Should Pass on Lyft Stock
If you believe Wall Street analyst ratings are gospel, Lyft could be the stock for you. Of the 41 covering it, 24 rate it a “buy.” Only one considers it an outright “sell.” Overall, it’s got an overweight rating with a median target price of $35, more than double its current price.
That’s got to count for something, right? Wrong.
While Lyft’s Q1 2022 results were actually quite good — its adjusted net income was $24.6 million compared to an adjusted net loss of $114.1 million a year earlier, and it had a 44% increase in revenue — it continues to generate negative cash flow from operations despite an adjusted net profit in the first quarter.
Analysts might like LYFT stock, but I sure don’t. There are better fish to fry, starting with the two I mentioned earlier.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.