Instacart, also known as Maplebear (CART), recently went public with its initial public offering (IPO) at $30 per share. However, the company is currently experiencing difficulties as Wall Street analysts express concerns about its near-term prospects. The stock opened at $42 but has since been declining. On Monday, it reached a new post-IPO low of $27.51, dropping more than 7%.
Gordon Haskett analyst Robert Mollins joined in the skepticism by covering Instacart with a Hold rating and setting a target price of $31. He joins other analysts, such as Bernie McTiernan from Needham and Jake Fuller from BTIG, who both provided Neutral ratings for the company.
Mollins explains in a research note that he doubts the continued growth of grocery delivery adoption as consumers become more cautious with their spending. Recent survey data indicates a decrease in consumer demand for online grocery delivery compared to the levels seen during the pandemic. Mollins also highlights the potential shift back to working in offices, which may lead some people to prefer shopping in physical stores for groceries instead of ordering them online at higher costs.
Competition is another concern for Instacart. Mollins points out that the company has already lost market share in the online grocery delivery segment due to competition. He believes that customers might be enticed to switch to alternative programs offered by Amazon.com (AMZN) and Walmart (WMT) that provide more services and better value. Ultimately, Mollins concludes that there are too many risks and insufficient catalysts to generate excitement among investors about the company’s current valuation discount compared to the broader market.