For mobility stocks like Uber Technologies Inc (NYSE:UBER) and Lyft Inc (NASDAQ:LYFT), the rollout of autonomous vehicles (AVs) "has become a central focus for investors," says Bank of America Securities analyst Justin Post.
While Federal Highway Administration estimates US drivers travel 3 trillion miles annually, Uber and Lyft currently capture only 1% of this, the analyst stated.
If driverless AVs lower the cost per mile and adoption becomes more mainstream, AV ride-hailing could expand to 20% of annual US vehicle miles traveled over the next 15 years, Post said. Assuming a cost per mile at $1.5-2.0, Bank of America estimates a $900 billion to $1.2 trillion U.S. “market opportunity," he wrote.
The Ratings: The post has a Buy rating on Uber with a $119 price target and an Underperform rating on Lyft with a $19 price target.
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The Thesis: If Uber can effectively integrate AVs, its US mobility bookings to grow at a CAGR of 13%-20% assuming market share ranging from 30%-70%, the analyst stated.
While there are concerns around lower-cost AVs impacting margins, Uber may be able to maintain US mobility margins at around 10%, he added.
UBER, LYFT Price Action: Shares of Wynn Resorts had declined by 3.88% to $88.98, while Lyft's stock was down 2.67% to $21.89 at the time of publication on Tuesday.
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