Lyft shares could see big gains as the ride-share company cuts costs and sees demand stabilize, KeyBanc said. Analyst Justin Patterson upgraded the stock to overweight from sector weight. He also set a price target of $24, implying an upside of 55.7% over Monday's close. "Ridesharing data appears stable in our Key First Look (KFL) Data sample, with Lyft data actually improving over the course of December," Patterson said in a Monday note to clients. "When we layer this in with aggressive cost-cutting action in recent quarters and an ongoing recovery along the West Coast, we see meaningful opportunity for improvement in Lyft's EBITDA over the course of 2023." The stock advanced 3.1% in premarket trading. It has gained 39.8% so far in 2023 after dropping 74.2% last year. Patterson raised his 2024 EBITDA outlook by about 2% to $848 million, which is above the Wall Street consensus estimate of $828 million. He also Lyft's cost-cutting actions including a 13% reduction in workforce in early November helped drive EBITDA upside. He said data shows the operating environment has improved throughout the fourth quarter and can be taken to mean growth has stabilized and will improve in 2023. On the driver side, Patterson said app download growth has also stabilized and is now in line with Uber , leading the analyst to believe driver acquisition has normalized. Patterson called the stock's valuation attractive as it trades at 9 times its 2024 its enterprise-value-to-EBITDA ratio, which reflects mid-teens growth and margin expansion. He said there's upside to current estimates due to money-saving initiatives and a recovery in the U.S. west coast market. To be sure, he said the stock could perform differently than expected if pricing headwinds are worse than anticipated, the West Coast market doesn't recovery like he expects or if cost-cutting actions don't provide an upside to EBITDA. The upgrade reflects a more bullish attitude compared to competitor Uber, which Patterson rates at sector weight. — CNBC's Michael Bloom contributed to this report.