Company Reports

With a network of nearly 8 million monthly active customers and over 600,000 drivers, Instacart’s grocery delivery platform boasts a strong presence across the United States. The firm benefited from a pandemic-induced surge in online grocery ordering in 2020, with its gross transaction value eclipsing $20 billion (versus $5 billion in 2019) as retailers hastily joined forces with Instacart to meet consumers’ evolving purchasing preferences that favored home delivery. In the years that followed, Instacart has managed to maintain a resounding position in the grocery delivery industry, as the platform’s more than $30 billion in gross transaction value gives it about 70% share of grocery sales placed on third-party intermediary platforms and about 30% of total grocery delivery sales (per eMarketer).

With a network of nearly 8 million monthly active customers and over 600,000 drivers, Instacart’s grocery delivery platform boasts a strong presence across the United States. The firm benefited from a pandemic-induced surge in online grocery ordering in 2020, with its gross transaction value eclipsing $20 billion (versus $5 billion in 2019) as retailers hastily joined forces with Instacart to meet consumers’ evolving purchasing preferences that favored home delivery. In the years that followed, Instacart has managed to maintain a resounding position in the grocery delivery industry, as the platform’s more than $30 billion in gross transaction value gives it about 70% share of grocery sales placed on third-party intermediary platforms and about 30% of total grocery delivery sales (per eMarketer).

We are slightly raising our fair value estimate on no-moat Instacart to $34, from $33 previously, primarily due to a reduction in our assumed cash drag from working capital and our lower long-term reinvestment rate. We currently view shares as fairly valued.

No-moat Maplebear (Instacart) delivered solid fiscal 2024 first-quarter results as the firm continued growing at a brisk pace, with gross transaction value, or GTV, climbing 11%. We were pleased to see GTV growth underpinned by a 9% increase in order volume (to 73 million), comfortably exceeding our 5% forecast and marking a stark reversal from the slight volume decline seen in the first quarter of last year. Advertising revenue followed commensurately, with percentage growth in the high single digits.

Instacart (Maplebear) is the market leader among intermediary platforms that aggregate consumer demand for groceries, which according to eMarketer will grow at 13% annually to around a $77 billion market by 2027. In our view, Instacart is building a network effect moat between retailers, consumers, shoppers, who gather and deliver grocery orders, and advertisers. However, we do not think the firm has reached the point where its network can easily fend off fierce competition from DoorDash and Uber, which also have strong network effect platforms and have gained market share.

We are maintaining our $33 fair value estimate on Maplebear, which does business as Instacart. The firm reported solid fourth-quarter results with strong growth in orders accompanied by a slight increase in order value. We were slightly disappointed with advertising revenue growth that trailed the overall digital advertising market. In addition, increasing incentives to consumers, which may signal the lack of a network effect, pressured the take rate a bit. Significant improvement in consumer acquisition cost is unlikely and a better take rate is likely to be accompanied by higher marketing spending. Instacart must keep aggressively spending to attract and retain consumers given the increasing presence of DoorDash and Uber.

Instacart (Maplebear) is the market leader among intermediary platforms that aggregate consumer demand for groceries, which according to eMarketer will grow at 13% annually to around a $77 billion market by 2027. In our view, Instacart is building a network effect moat between retailers, consumers, shoppers, who gather and deliver grocery orders, and advertisers. However, we do not think the firm has reached the point where its network can easily fend off fierce competition from DoorDash and Uber, which also have strong network effect platforms and have gained market share.

Instacart (Maplebear) is the market leader among intermediary platforms that aggregate consumer demand for groceries, which according to eMarketer will grow at 13% annually to around a $77 billion market by 2027. In our view, Instacart is building a network effect moat between retailers, consumers, shoppers, who gather and deliver grocery orders, and advertisers. However, we do not think the firm has reached the point where its network can easily fend off fierce competition from DoorDash and Uber, which also have strong network effect platforms and have gained market share.

We are initiating coverage of Instacart (Maplebear) with a no-moat, Very High uncertainty rating, and a fair value estimate of $33 per share. We currently view the stock as undervalued.