Instacart: Market Dominance at Risk With Heightened Competition

Key Morningstar Metrics for Instacart

• Fair Value Estimate: $33.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

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

Instacart 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, the firm is building a network effect between retailers, consumers, shoppers, and advertisers. However, we do not think the firm has reached the point where its network can easily fend off fierce competition from DoorDash DASH and Uber Technologies UBER, which also have strong network effects and have gained market share.

Nearly 8 million consumers in the United States use Instacart’s app to order products from grocery stores, of which the firm receives a cut that has averaged around 5%-6% over the last three years. The consumers have access to over 5,500 brands made available by approximately 85% of grocery stores in the country. The total grocery sales market in the U.S. was $1.5 trillion in 2022. Within that market, sales initiated and completed on intermediary platforms like Instacart represented 3%, or $41 billion.

While we think additional growth opportunities remain—such as expansion into markets outside the U.S. and Canada, plus the listings of more products—the firm’s U.S. market share has been declining while DoorDash and Uber have gained. We think Instacart will remain the market leader, but we expect its market share to decline to around 50% by 2027 from more than 70% in 2022.