Bubble or no bubble, this is the best stock for AI exposure: analyst
Investing.com - Benchmark has reduced its price target on Instacart (NASDAQ:CART) to $60.00 from $67.00 while maintaining a Buy rating on Tuesday. Currently trading at $38.97, the stock sits well below even the lowest analyst target of $40, with InvestingPro data suggesting the company is undervalued based on its Fair Value assessment.
The adjustment follows Instacart’s third-quarter results, which Benchmark described as "relatively stable," with fourth-quarter revenue and adjusted EBITDA guidance aligning with expectations at the midpoint. The company’s fourth-quarter advertising growth was guided at 6-9% year-over-year, down from the 10% reported in the third quarter. Despite this slowdown, Instacart has maintained impressive 10.47% revenue growth over the last twelve months, with a remarkable 74.84% gross profit margin.
Benchmark noted that Instacart management attributed the slowdown to "large brand spend moderation and tough compares" but expressed confidence in returning to double-digit advertising growth in 2026. This optimism is based on several growth drivers, including the expanding Carrot Ads network, on-platform AI enhancements, off-platform revenue-sharing deals, and in-store Caper cart advertisements. InvestingPro data shows Instacart has been profitable over the last twelve months with $479 million in net income and maintains an overall "GREAT" financial health rating.
On the competitive front, Benchmark acknowledged that while Instacart maintains incumbency in online delivery advertising, both DoorDash (NASDAQ:DASH) and Uber Eats (NYSE:UBER) are "steadily scaling their ads’ practices," suggesting increased competition in this space.
Regarding affordability initiatives, Benchmark highlighted management’s observation that retailers achieving price parity are growing approximately 10 percentage points faster with better retention rates, with multiple banners already implementing or testing parity in major markets including Nashville, Chicago, and Dallas.
In other recent news, Instacart’s third-quarter results have drawn varied reactions from analysts, emphasizing the company’s financial performance and future outlook. Instacart reported that its Gross Transaction Value (GTV) and EBITDA exceeded prior estimates by 1% and 4%, respectively, with a fourth-quarter GTV growth projection of 9-11%. Bernstein raised its price target for Instacart to $48, highlighting the company’s enterprise growth and maintaining an Outperform rating. Meanwhile, Cantor Fitzgerald adjusted its price target to $45, noting the company’s strong quarterly results and maintaining an Overweight rating.
Needham lowered its price target to $50, citing competitive concerns and slightly lower 2026 estimates, while still keeping a Buy rating. Mizuho also reduced its target to $42, maintaining a Neutral rating, and pointed out that the results did not significantly alter the investment thesis. Goldman Sachs adjusted its price target to $66, attributing the change to ad headwinds but acknowledged better-than-expected GTV driven by various operational improvements. These developments reflect the mixed analyst sentiment regarding Instacart’s performance amid competitive pressures and growth prospects.
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