DoorDash and Lyft should team up, analyst says

Shares of both Lyft (LYFT) and DoorDash (DASH) are on the rise in early trading on Monday after RBC Capital Markets upgraded both stocks to Outperform from Sector Perform. Analyst Brad Erickson believes the companies could benefit from an "opportunity to work together vs. a common competitor that could create significant value for both." However, the potential opportunities he sees are more like a loyalty partnership rather than DoorDash buying Lyft, for example.

Yahoo Finance's Brad Smith and Seana Smith discuss the note in the video above.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich

Video Transcript

BRIAN SMITH: Lyft and DoorDash, they're both getting some bullish calls from RBC Capital this morning, with the analysts behind the call, upgrading both stocks from sector perform to outperform, saying both companies could greatly benefit from a potential partnership. You're taking a look at shares of Lyft here this morning. They're feeling lifted by about 6% as of right now. There was a lot to really break down from this particular call here.

But really, trying to ship Lyft and Dash ship, for all those who don't have Urban Dictionary out there when you're trying to basically put two of your friends together and hope that they come out in a successful relationship, at least that was my interpretation of it. But that's what the [INAUDIBLE].

- Actually, new. I did not know that word.

BRIAN SMITH: I had to look it up a couple of years ago.

- There we go, ship, OK. Well, that's the perfect analogy to use then because this is more of a partnership. It's not exactly like they're saying it's going to be a buyout. That doesn't necessarily make sense. But it's more of a partnership here where both companies will be positioned, at least in the eyes of the analyst there. Brad Erickson saying that both will be able to potentially benefit from this.

He also mentioned, when it comes to Lyft-- and I think this is important to point out-- that they have a driver supply analysis. And their analysis of that points to a more stable duopoly between Lyft and Uber. And I think that was a big question over the last several quarters, whether or not Lyft was going to be able to survive on its own? How viable of a competitor it was going to be to Uber in the long run given Uber's dominance here of market share?

But again, RBC, more positive on the name on your screen, DoorDash more positive on Lyft. And also saying that, hey, a partnership between these two could make a heck of a lot of sense and could push gains for both here, moving forward.

BRIAN SMITH: Yeah. If you have Grubhub and reading this note this morning, you're like, what are we, chopped liver? We got Grubhub, we got Seamless. But look, DoorDash crushing it right now with Caviar. That was a very strategic acquisition that they made years back. And so now, thinking about how they can lean further into what could be a partnership at some point between Lyft and DoorDash.

And ultimately, for DoorDash, what that means in the expansion of existing users of a Lyft platform there, that could potentially extremely benefit DoorDash. They moved to outperform on Dash, raised their price target to $175 as well, 27 times the EBITDA for, what? 2025 is what they're looking at here, and believing that new verticals plus international may be on the doorstep of stabilizing profitability for DoorDash here.

- Certainly, some bullish names out here raising the price target on Lyft to 23 from 17. Certainly, they see a lot of upside from current trading levels.