Lyft's main taxi business is already profitable in some areas, but self-driving cars and bike-sharing are eating into that revenue

Reuters

A man rides a Lyft scooter near the White House in Washington DC

• JPMorgan says Lyft's core ride-hailing business is already profitable in certain markets.
• It's other bets on things like bikes, scooters, and self-driving cars that are dragging down the company's balance sheet.
• Other Wall Street analysts have also raised their estimates and targets for Lyft following second-quarter earnings that topped expectations.
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Lyft could turn a profit sooner than Wall Street previously thought, and analysts are beginning to take notice.

What's more, the company's central ride-hailing component could already be profitable in many busy cities, JPMorgan estimates. It's the other, more expensive bets like those on self-driving cars and bike and scooter rentals that are siphoning off the excess revenue.

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"We believe that virtually all of Lyft's rideshare markets are profitable when including fully loaded Sales & Marketing and that core ridesharing profitability is far ahead of the company overall due to heavy investments in bikes & scooters and AV," the bank said in a note to clients last week, reiterating its "overweight" rating for the stock.

That's all thanks to a quicker-than-expected growth in the United States' ride-hailing market, which Lyft estimates could be as large as $1.2 trillion annually, when accounting for how much Americans' spend on transportation each year.

"We believe the biggest change in Lyft's business since the IPO five months ago is how quickly the US rideshare market has rationalized," JPMorgan said.

JPMorgan's not the only sell-side shop impressed by how quickly Uber and Lyft have been able to stave customers off of the coupons and fare discounts that helped both companies grow and gain market share leading up to their public offerings earlier this year.

Read more: Uber and Lyft drivers reveal the hardest parts of their jobs

"The worry initially was that it could be tough to raise fares or cut driver pay in a competitive category, or to extract enough OpEx leverage in the absence of either of those," Jake Fuller, an analyst at Guggenheim, said in a note to clients on Monday raising the firm's target price for shares of Lyft to $60. Those worries have started to fade.

"We all underestimated how quickly the competitive mindset might shift under public ownership and how much leverage there is in the model to pricing," Fuller continued. "Price increases should stimulate take-rate, bolster contribution margin and yield narrowing losses, with the potential for upside to consensus across key metrics."

Overall, Wall Street remains optimistic about Lyft's prospects, giving the stock an average price target of $73, with a majority of analysts rating the name a "buy," according to a Bloomberg poll.

On it's second-quarter earnings, which beat analyst expectations and catalyzed some of Wall Street's recent optimism, Lyft's CFO Brian Roberts reiterated that the company expects 2019 to be its "peak investment year."

"We expect that the momentum and the efficiencies we are realizing in our core ride sharing business, will enable us to make progress on our path to profitability and to be clear, we are not reducing our investments in key strategic initiatives including bikes and scooters, autonomous and driver centers," he said. "It's just the strength and momentum in ride sharing that's helping offset the investments we're making."

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