Instacart, Uber Deal 'Makes More Sense Now,' Analyst Says: Here's Why

Instacart parent company Maplebear Inc (NASDAQ:CART) received an upgrade to Buy while also getting added to Needham’s conviction list on Monday as analysts expressed concern over increasing competition.

What Happened: Needham analyst Bernie McTernan upgraded Maplebear from a Hold rating to a Buy rating. He also set a price target of $56, suggesting a nearly 30% upside from current levels.

“We think the stronger than expected results in ’24E suggest our fears over competition and TAM pull forward are overblown likely driven by CART’s leading customer experience in grocery, which they continue to improve,” the Needham analyst said in a new note to clients.

Maplebear last reported quarterly earnings in November, turning in its fourth straight quarter of positive GAAP net income. Revenue jumped 12% year-over-year as orders jumped 10%. The San Francisco-based company guided for continued growth between 8% and 10%.

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The Needham analyst believes Maplebear’s recent results show stronger-than-expected customer behavior. This creates the potential for double-digit growth in the firm’s bull case. Needham put a bull case price target of $80 on Maplebear shares.

“Growth expectations for ’24 have been on the rise during the second half of the year, providing further evidence to us that COVID cohorts are stable and post-COVID cohorts are large enough to drive consolidated GTV growth,” the analyst said.

McTernan noted that there’s a lot of competition in the grocery delivery space.

Maplebear stands out among consumers given its leading customer experience, McTernan says. His grocery tracking research suggests that the company maintains its supply lead versus competitors like DoorDash Inc (NASDAQ:DASH) and Uber Technologies Inc (NYSE:UBER).

Investors have some downside protection because of potential M&A opportunities in the space. Uber is looking to diversify revenue streams away from mobility. Therefore, Maplebear could be an enticing acquisition, McTernan says.

“However, given the recent price movements, we think the math is difficult to get to work, which is why we view M&A as floor support,” the analyst said.

“While we are not the first to write about the potential for M&A between Uber and [Instacart], we do see the structural logic, and it makes more sense now if Uber mobility fears are founded on autonomous vehicles,” he added.

Price Action: Maplebear shares are up approximately 90% over the past year. The stock was down 0.43% at $44.04 at the time of writing Monday, per Benzinga Pro.

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