RBC’s Brad Erickson sees an about 30% upside in Lyft stock

Lyft Inc (NASDAQ: LYFT) reported a strong revenue beat in its second quarter results which helped the ride-hailing company become EBITDA profitable for the first time ever. In a note sent to clients following the earnings release, RBC Capital Markets' Brad Erickson maintained an Outperform rating on Lyft's stock with an unchanged $70 price target.

The bull case for Lyft stock

Lyft "handily" beat expectations in the second quarter due to active ride upside and pricing benefits stemming from a driver shortage, the analyst wrote in the report. July driver trends remain encouraging and anecdotal commentary around airport traffic makes the case for Lyft's stock to benefit from the "re-opening thesis" which is "still very much in process."

Debunking the bear case

Lyft bears do have some ammunition in the belt exiting the earnings report. Specifically, Lyft's management guided for incremental investments in driver supply despite prices set to normalize. The analyst wrote this "may spook" some investors as the level of investments could remain high into 2022.

But the analyst isn't buying into the bear camp. He wrote:

The bottom line

Lyft may have thrown "cold water" on the stock after its commentary on incremental investments but this should be "entirely transitory," the analyst wrote. Investors should overlook any near-term noise and focus on 2022 amid expectations for the ride-hailing company to earn hundreds of millions of dollars in EBITDA. Erickson wrote: