Instacart, the popular grocery delivery service, is set to go public next week, providing an exit opportunity for its venture capital investors. With its high-margin revenue streams from fees, grocery enterprise software, and advertising, it’s expected that investors will be eager to see the stock (under the ticker symbol CART) perform well as the tech sector bounces back after a year of risk reduction.
In its recent S-1 filing, Instacart revealed a valuation significantly lower than a year ago, reflecting a decline in investor interest in food delivery companies.
However, this decline is not due to a decrease in demand for grocery delivery services. Rather, it is a result of the overall market’s decision to reduce exposure to tech stocks amidst rising interest rates and a realization of market frothiness. After a period of SPAC IPOs, crypto bull runs, and other frenzies, the market needed to reduce risk.
Compared to competitors like DoorDash and Uber Eats, Instacart’s growth has been relatively slow, with only a 6% increase in gross transaction volume year-over-year. To satisfy investor expectations, Instacart will need to demonstrate how it plans to accelerate growth, a common demand for tech stocks in 2023, according to analysts from Alliance Bernstein.
Read on to discover what analysts are questioning about Instacart’s business fundamentals as the company prepares for its highly anticipated IPO.
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