Instacart went public on Tuesday at $30 a share and opened at $42. But the grocery delivery company's stock has been sliding ever since. As of Friday's close, the stock fell 2.12% to $30.
One reason for the stock price decline is that Instacart has been snubbed by analysts. On Tuesday, Needham analyst Bernie McTernan initiated coverage of the company with a "hold" rating, citing concerns about slowing growth and concerns about slowing growth from Amazon (AMZN.US), Walmart (WMT.US), Uber (UBER). US), DoorDash (DASH.US) and other companies expressed concern. By Friday, BTIG analyst Jake Fuller also began covering it, giving it a "neutral" rating. Like McTernan, he did not give the stock a price target.
He pointed out that the grocery market has low online penetration, but added that post-COVID-19 acceptance of such services may be more difficult than food delivery. He estimated that online grocery services account for about 12% of the market, with annual market share growth likely to be less than one percentage point. He expects that number to reach about 15% by 2026.
Fuller predicts long-term annual gross order value growth for the industry will be in the high single digits. And he thinks Instacart's growth will be slower, although that will be offset to some extent by growing advertising revenue.
He said Instacart's "profit situation is healthy," with a gross profit margin of 76%. He also sees other positives, including "solid market position, low category penetration and add-on opportunities." But he emphasized that these factors were still offset by negative factors. "Moderate growth, increasing competition and valuation lead to a 'neutral' rating."
