L1 Capital has High Hopes for Lyft Inc. (LYFT)

L1 Capital, an independent investment management firm, published its fourth quarter 2020 “L1 Long Short Fund Limited” investor letter – a copy of which can be downloaded here. The Company’s NTA increased 34.4% for the quarter (ASX200AI +13.7%) and 29.5% for the 2020 calendar year (ASX200AI 1.4%). You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

L1 Capital, in their Q4 2020 investor letter, mentioned Lyft, Inc. (NASDAQ: LYFT) and emphasized their views on the company. Lyft, Inc. is a San Francisco, California-based ridesharing company that currently has a $21.2 billion market capitalization. Since the beginning of the year, LYFT delivered a 31.30% return, impressively extending its 12-month gains to 133.73%. As of March 26, 2021, the stock closed at $64.51 per share.

Here is what L1 Capital has to say about Lyft, Inc. in their Q4 2020 investor letter:

Lyft (long +78%) is a ride-sharing company in the U.S. that competes with Uber. Since its IPO in 2019, the company has suffered from regulatory uncertainty (from California’s push to reclassify drivers as employees) and question marks over its ability to compete effectively with Uber. Together with the COVID-19 pandemic curtailing demand, the stock had declined over 60% when we initiated a position in October. Our thesis was that with Uber and Lyft both prioritising profitability and no new competitors emerging, market share would remain stable while demand would recover rapidly post-COVID. Our thesis was further supported by early polling ahead of the U.S. elections which indicated that California would pass driver reclassification legislation, permanently enshrining drivers’ contractor status as part of the Prop 22 ballot. The November vaccine news and the passing of the Prop 22 ballot have resulted in the shares nearly doubling since we first invested. Despite this strong performance, we continue to see substantial upside in Lyft. We believe Lyft can generate significant earnings growth over the medium term with the ability to generate consistent top-line growth above 30% and deliver long term EBITDA margins of ~25%.”

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Our calculations show that Lyft, Inc. (NASDAQ: LYFT) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Lyft, Inc. was in 52 hedge fund portfolios, compared to 32 funds in the third quarter. LYFT delivered a 32.03% return in the past 3 months.