Bernstein raises Instacart stock price target to $60 on advertising growth

Investing.com - Bernstein raised its price target on Instacart (NASDAQ:CART) to $60.00 from $55.00 on Monday, while maintaining an Outperform rating on the stock. The new target represents potential upside from the current price of $49.11, with the stock showing strong momentum, having gained over 40% in the past year. InvestingPro data reveals the company maintains impressive gross profit margins of 75.22%.

The research firm cited potential upside to Wall Street’s EBITDA forecasts and expressed confidence in the company’s current valuation. With current EBITDA at $490M and an overall financial health score rated as "GREAT" by InvestingPro, the company shows strong fundamentals. Bernstein noted that Instacart’s third-quarter gross transaction value (GTV) guidance would be a key focus as the company laps a larger contribution from its Restaurants segment.

Bernstein indicated that maintaining the existing GTV framework would likely be sufficient to meet market expectations. Despite modeling modest deceleration, the firm believes Street expectations remain achievable as the Restaurants business continues to scale.

The analysts anticipate margin expansion driven by fixed cost leverage and advertising-led improvements in take rates. Bernstein specifically adjusted its ad revenue expectations higher, citing a more stable macroeconomic environment and growth in offsite advertising.

Continued improvement in order costs would provide additional upside to Bernstein’s financial model for Instacart, according to the research note.

In other recent news, Instacart has announced a series of significant developments. The company reported a leadership transition with Chris Rogers set to become the new CEO on August 15, succeeding Fidji Simo, who will remain as Chair of the Board. This change comes as Simo departs for a role at OpenAI. Citi analysts have maintained their Buy rating for Instacart with a $57 price target, emphasizing the smooth transition and Rogers’ extensive experience in managing retail partnerships. Additionally, Instacart has expanded its share repurchase program, increasing the authorization to buy back up to $1 billion of its common stock. Citizens JMP reiterated its Market Outperform rating and $55 price target, highlighting Instacart’s strategic partnerships with OpenAI, YouTube, and TikTok as well as its order density. The firm noted these factors as key in strengthening Instacart’s competitive position. Furthermore, the company’s recent performance indicators have shown positive trends, with a 14% year-over-year increase in IC+ members and growing advertising revenue. These developments reflect Instacart’s ongoing strategic efforts and operational adjustments.

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