HSBC analyst Masha Kahn upgraded Uber Technologies (UBER) to Buy from Hold with a price target of $44, down from $49.

The analyst this morning also upgraded Lyft (LYFT) to Buy from Hold. Investor sentiment has turned "more sour" on ride-hailing stocks following large reported losses, regulatory headlines out of California and concerns around slowing growth, Kahn tells investors in a research note.

However, with Lyft and Uber shares down 23% in the last three months, regulatory concerns are priced in, says the analyst. Further, Kahn continues to see "a lot of optionality" around product improvements for both Uber and Lyft.

In addition, with 60% gross margins in the U.S. and over 70% internationally, the ride-hailing businesses of companies can reach profitability if both pull back on sales and marketing and leverage the fixed cost base, says the analyst. Kahn also believes food delivery is a "free" option for Uber investors.