Early investors profit from Instacart's stock price "returning to pre-liberation overnight"
On Friday, Instacart's closing stock price fell back to its IPO price.
According to Dolphin Research APP, on Friday, the closing stock price of Instacart (CART.US) fell back to the IPO issue price because early investors have taken profits, while analysts are concerned about the competition and growth slowdown faced by the company.
Instacart went public this Tuesday at a price of $30 per share and opened at $42. However, the stock price of this grocery delivery company has been declining ever since. As of the Friday close, the stock fell 2.12% to $30.
One reason for the stock price decline is that Instacart has been overlooked by analysts. On Tuesday, Needham analyst Bernie McTernan initiated coverage on the company with a "hold" rating, citing concerns about growth slowdown and fierce competition from companies such as Amazon (AMZN.US), Walmart (WMT.US), Uber (UBER.US), and DoorDash (DASH.US). By Friday, BTIG analyst Jake Fuller also started coverage on Instacart with a "neutral" rating. Like McTernan, he did not provide a target stock price for the company.
Fuller wrote, "Relative to moderate growth prospects and challenging competitive dynamics, its valuation is fair."
He pointed out that the online penetration rate of the grocery market is very low, but he added that acceptance of this service may be more challenging than food delivery services after the COVID-19 pandemic. He estimated that online grocery services account for about 12% of the market share, and the annual market share growth may be less than one percentage point. He expects this number to reach about 15% by 2026.
Fuller predicts that the long-term annual total order value growth in this industry will be in the high single digits. However, he believes that Instacart's growth will be slower, although it will be partially offset by continuously growing advertising revenue.
He stated that Instacart's "profitability is healthy" with a gross margin of 76%. He also sees other positive factors, including "strong market position, low category penetration, and additional opportunities." But he emphasized that these factors are still offset by negative factors. "Moderate growth, intensified competition, and valuation lead us to a 'neutral' rating."