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On Monday, Benchmark analyst maintained a Hold rating on Instacart (NASDAQ:CART), ahead of the company’s fourth-quarter earnings report scheduled for Tuesday, February 25, after market close. The analyst expects Instacart to potentially reach the higher end of its fourth-quarter Gross Transaction (JO:TCPJ) Value (GTV) estimates, bolstered by ongoing secular trends seen throughout the quarter. The company enters this earnings season with strong momentum, as revealed by InvestingPro data showing a 26.42% year-to-date price return and an impressive gross profit margin of 75.38%.
Instacart is set to report its earnings amid an industry backdrop where total online grocery delivery sales saw a year-over-year increase of 25% in December, according to Grocery Dive. This is compared to a more modest 5% year-over-year growth for grocery pickup services. In the second half of 2024, total online grocery sales rose by 18% year-over-year, which overshadows Instacart’s guided GTV growth of 10% for the same period. InvestingPro analysis indicates strong financial health with a "GREAT" overall score, supported by a robust current ratio of 3.06, suggesting excellent operational efficiency. Subscribers can access 14 additional ProTips and comprehensive financial metrics for deeper insights.
Despite these positive indicators, Instacart faces challenges due to its relatively low subscriber penetration and competitive pressures. The company’s transaction take rate is also expected to come under scrutiny, as Benchmark anticipates a year-over-year decline. This is in part due to Instacart’s shift in investment focus towards improving affordability for its customers. The company’s financial position remains solid, with revenue growth of 10.08% in the last twelve months and net income expected to grow this year, according to InvestingPro data.
In the third quarter, Instacart reported a transaction revenue take rate of 7.3%, which was on the higher end of its long-term target range of 6.5% to 7.5%. However, the analyst suggests that this rate might normalize in the future, reflecting the firm’s expectations of a mean reversion.
Overall, Benchmark’s projection for Instacart’s 2025E Transaction revenue stands at 4% below the consensus, indicating caution regarding the company’s near-term revenue growth prospects from transactions. Instacart’s forthcoming earnings report will provide further insight into how the company is navigating its competitive landscape and investment priorities.
In other recent news, Instacart’s fourth-quarter earnings outlook has garnered attention, with Oppenheimer analyst Jason Helfstein raising the company’s stock price target to $65, citing robust third-party data and a positive growth trajectory in Gross Transaction Value (GTV). The firm maintains an Outperform rating, projecting a 13% year-over-year GTV growth. Seaport Global Securities has also initiated coverage on Instacart with a Buy rating and a $62 price target, highlighting the company’s leading position in the online grocery market and potential for high-single-digit revenue growth. Meanwhile, Bernstein analysts have raised their price target to $55, emphasizing improved EBITDA forecasts and Instacart’s strategic positioning in the on-demand service market.
Mizuho (NYSE:MFG) Securities has joined the positive outlook, setting an Outperform rating with a $55 price target, pointing to Instacart’s advanced technology integration and strategic investments as key growth drivers. The firm anticipates advertising revenue will further bolster EBITDA growth. Additionally, Instacart has announced partnerships with DUMAC Business Systems and TRUNO Retail Technology Solutions to expand its AI-powered Caper Carts, aiming to modernize the in-store shopping experience. This collaboration underscores Instacart’s commitment to enhancing retail experiences and supporting independent grocers. These developments reflect Instacart’s strategic initiatives and market positioning as the company continues to expand its technological offerings and market influence.
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