(Bloomberg) -- Uber Technologies Inc. and Lyft Inc. edged higher before the bell as sellside analysts weighed the possibility of a compromise for a California bill aimed at getting drivers a guaranteed minimum wage.
California’s Senate passage of Assembly Bill 5 on Wednesday “is a clear financial negative,” said Wedbush analyst Daniel Ives. But he expects the ride-hailing companies to push back and find “a more middle-ground approach” with the state.
The bill now goes back to the Assembly, which already passed an earlier version, before it is sent to the state’s Governor Gavin Newsom, who remains in talks with the companies.
Ives expects an agreement will be reached either through negotiations before the law goes into effect on January 1, 2020, or via a ballot initiative from Uber, Lyft, and Doordash Inc. that would avoid classifying drivers as employees while setting new minimum standards for pay and benefits.
If the bill moves forward, Ives expects ride-hailing companies to cut hiring, reduce drivers’ flexibility and pass the higher costs onto customers in the state to offset the protective measures. Uber and Lyft both gained less than 1% in pre-market trading.
Loop Capital analyst Jeffrey Kauffman took a somewhat more negative view of the negotiations and trimmed his price target on buy-rated Uber to $48 from $54 and hold-rated Lyft’s to $52 from $60.
“The ultimate outcome will be a concession that raises costs, most of which are passed through to consumers, with some negative demand elasticity,” Kauffman wrote to clients in a note.
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