Instacart opened the week with several positive reviews from Wall Street, overcoming what seemed to be a hard-to-please crowd that cautioned on potential headwinds. But the better ratings did little to lift shares.
(Bloomberg) — Instacart opened the week with several positive reviews from Wall Street, overcoming what seemed to be a hard-to-please crowd that cautioned on potential headwinds.
But the better ratings did little to lift shares.
America’s largest grocery-delivery company, incorporated as Maplebear Inc., fell 2.4% in New York on Monday as the so-called quiet period for analysts at firms that participated in its initial public offering came to an end.
After receiving a lukewarm reception following its IPO in September, with zero analysts recommending investors buy the stock, Instacart now has nine buy ratings, seven holds and one sell.
It has an average price target of $34.14, which is above Friday’s closing price of $25.57 and the IPO price of $30, according to data compiled by Bloomberg.
On Monday, JPMorgan analysts led by Doug Anmuth started coverage of the stock at overweight, saying they liked its “marketplace leadership position and first-mover tech advantage within a secular growth category, healthy profitability profile, and advertising potential.”
Meanwhile, Stifel’s Mark Kelley gave the stock a buy recommendation and shared, with Goldman Sachs, a Street-high price target of $48, seeing the company as “one of the best positioned businesses to benefit from continued online penetration of the US grocery market.”
One reason for the suddenly bullish appraisals is Instacart’s advertising business.
Piper Sandler’s Alexander Potter and Ben Johnson called it a “profitability driver” that could not be matched by other gig-based platforms, while Baird Equity Research analyst Colin Sebastian thought it was “one of the most successful roll-outs of retail media, perhaps only second to Amazon.”
On its trading debut in September, Instacart jumped as much as 43%.
However, in the following session, virtually all of those gains were wiped out as investors questioned the grocery-delivery company growth prospects.
“We believe competitive dynamics in the industry will limit Instacart’s long-term growth potential as the company faces pressure from retailers outside of its network, other intermediary platforms, and emerging first-party services from leading partners,” Wedbush’s Scott Devitt and Michael Gerbino, who rate the stock neutral, wrote in a note Sunday.
Despite the slowdown, Citigroup analyst Ronald Josey believes the company “can reaccelerate growth as it reinvests in customer acquisition,” adding that improving order efficiencies and the launch of new ad products should lead to margin expansion.
“We believe the risk/reward is favorable at current levels as Instacart turns to execution,” Josey wrote.
–With assistance from Subrat Patnaik and Kit Rees.
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