Bubble or no bubble, this is the best stock for AI exposure: analyst
Investing.com - Instacart (NASDAQ:CART) stock fell 4% in after-hours trading following a report that Amazon is testing ultrafast delivery services that would include grocery and fast-moving consumer goods. Despite this setback, InvestingPro data shows Instacart has delivered a 1.42% return over the past week and maintains a strong financial health score of 3.34 (rated as "GREAT").
The Information published the report on Tuesday, triggering investor concerns about increased competition for the grocery delivery platform. Citizens maintained its Market Outperform rating and $60.00 price target on Instacart despite the news, representing a 40% upside from the current price of $42.79. According to InvestingPro analysis, Instacart is currently slightly undervalued based on Fair Value calculations.
Citizens noted that Amazon’s ultrafast delivery initiative remains in the testing phase, highlighting historical challenges in reaching sufficient order density for dark stores. The firm also pointed out that Amazon has previously pushed its grocery initiatives toward profitability through delivery fees.
While acknowledging Amazon as a serious competitor with over $100 billion in grocery gross merchandise value in the last twelve months, Citizens emphasized that Instacart still maintains strength in core "Sunday Shop" consumer behavior. This confidence aligns with Instacart’s impressive 74.46% gross profit margins and $3.63 billion in revenue over the last twelve months.
Citizens views the stock weakness as "an additional buying opportunity for Instacart holders," noting that Amazon’s Everyday Essentials business is growing at twice the rate of the rest of Amazon’s business. Instacart’s financial position remains solid with more cash than debt on its balance sheet and a current ratio of 3.64, indicating strong short-term liquidity. Discover more insights with InvestingPro, which offers additional ProTips and a comprehensive Pro Research Report on Instacart among 1,400+ top US stocks.
In other recent news, Instacart’s financial performance and future outlook have been under the spotlight with several analyst updates. The company reported third-quarter results that saw its gross transaction value and EBITDA surpassing prior estimates by 1% and 4%, respectively. Instacart’s fourth-quarter outlook projects gross transaction value growth of 9-11%, exceeding previous expectations. Despite these positive results, Benchmark lowered its price target for Instacart to $60, citing concerns over a slowdown in advertising growth. Similarly, Needham and Mizuho reduced their price targets to $50 and $42, respectively, due to competitive concerns. However, Bernstein raised its price target to $48, highlighting enterprise growth and describing the results as supportive of the company’s bull case. Cantor Fitzgerald maintained an Overweight rating but adjusted its price target to $45. These updates reflect a mixed sentiment among analysts regarding Instacart’s future performance.
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