Mizuho (NYSE:MFG) Securities launched research coverage of Instacart stock on Monday, assigning an Outperform rating and a price target of $55.
“We believe CART’s category-leading position in grocery delivery is underappreciated,” analysts led by James Lee said in a note.
Instacart (NASDAQ:CART) shares rose 1.5% in premarket trading Tuesday.
Mizuho analysts believe that competitive concerns surrounding Instacart are overstated, given the company's deep technological integration with grocers, which includes inventory management and a specialized delivery workforce. This integration, they argue, results in a superior user experience that is difficult for competitors to replicate.
Mizuho commends Instacart's strategy to invest for growth in a market with a total addressable market (TAM) of $1.2 trillion and only around 5% penetration for delivery services.
Instacart's initiatives to lower grocery costs have increased gross transaction value (GTV) growth to double digits year-to-date in 2024. Additionally, the integration of loyalty programs and dynamic pricing solutions are expected to make grocery pricing more affordable for consumers.
The report further emphasized the role of advertising in funding Instacart's growth investments, with the expectation that it will also drive EBITDA upside over time.
Analysts at Mizuho believe that the consensus long-term expectations for the company's EBITDA are conservative, and they predict that each 1% increase in take-rate could result in more than a 20% EBITDA upside. This perspective is supported by their estimate that Instacart's fiscal year 2027 EBITDA will be approximately 15% above the street's expectations.
On valuation, Mizuho argues that Instacart's stock is attractively priced at 9 times its fiscal year 2026 EV/EBITDA, which is a discount to their estimated revenue compound annual growth rate (CAGR) of over 10%.
“We believe the stock should trade at its growth rate as competitive concerns subside,” analysts continued.
The $55 price target set by Mizuho reflects an 11 times multiple of the forecasted fiscal year 2026 EBITDA, aligning with the company's expected growth trajectory.
Instacart stock currently holds 15 Buy ratings, 15 Neutral ratings, and no Sell ratings from Wall Street analysts.