Lyft (LYFT) has long-term potential in the autonomous vehicle, or AV, space but its partnerships are still in the early stages, and recent pricing challenges are likely to continue affecting profit margins, BofA Securities said in a note Thursday.

According to the analysts, they upgraded the company to buy after its Analyst Day in 2024, expecting that Lyft could limit market share losses and improve margins with a long-term margin outlook that seemed more conservative than Uber's (UBER).

However, results have been mixed and recent softness in bookings and margins suggests that the company may need to accelerate growth and improve margins to meet the expectations set during the Analyst Day.

BofA said Lyft is more exposed to Waymo than Uber, with around 20% of bookings coming from California, compared with Uber's less than 10%.

Waymo may start offering rides to San Francisco International Airport this year or the next, which would be a significant negative development for Lyft. Waymo is also expanding to other cities but San Francisco and Los Angeles are particularly important for Lyft due to its strong presence there, BofA said.

The analysts also noted that while Waymo's utilization rate is still only at 50%, there could be opportunities for expanded partnerships over time. However, with Tesla (TSLA) also entering the autonomous vehicle market in Texas and California, competition may increase and put additional pressure on pricing.

"Despite AV risk, we still see the long-term potential for Lyft in the AV ecosystem, but given its still-nascent partnerships, we no longer expect upside," the analysts said.

BofA downgraded Lyft to underperform from buy, while lowering its price target to $10.50 from $17.50.

Shares of Lyft fell more than 10% in recent trading.

Price: 11.58, Change: -1.38, Percent Change: -10.62