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Investors Plan to “Check Out” Instacart’s IPO in September

2023-08-27 Instacart

Analyst Insights

Investors Plan to “Check Out” Instacart’s IPO in September

Instacart, a dominant player in the US online grocery delivery sector, has recently unveiled its intentions to go public with the launch date scheduled for September.

Founded in 2012, Instacart has emerged as a leading online grocery delivery service in the US. Incorporated as Maplebear Inc., the San Francisco-based company has expanded its footprint across North America, serving customers through a vast network of retail partnerships.

Grown Beyond Delivery

Beyond its primary grocery delivery service, Instacart has diversified its offerings. The company has invested in technology solutions for grocery stores, leveraging vast consumer data to enhance sales.

Its platform includes tools and services that retailers can use to power their digital shopping channels. Additionally, Instacart has introduced products like “smart” shopping carts and has ventured into advertising, making it a significant revenue contributor.

Online Market Size

The grocery business stands as the largest retail category in the US, with a valuation of $1.1 trillion. However, only 12% of these sales are currently online, indicating a vast growth potential.

Instacart, with its dual online and in-store shopping approach, aims to tap into this potential, bridging the gap between digital and physical shopping experiences.

Profitability in 2022

Instacart’s financial trajectory has witnessed a significant turnaround. The company reported a profit of $428 million in 2022, a stark contrast to its $73 million loss in 2021.

This profitability was driven by multiple factors, including increased efficiency in its delivery system and a booming advertising business. The company’s revenue grew by 31% year-over-year to approximately $1.5 billion in the six months ending June 30, 2023

Online Retail is Risky

Despite its growth, Instacart faces challenges. The company’s reliance on a few major retailers for a significant portion of its Gross Transaction Value (GTV) poses a risk. Any decision by these retailers to launch their delivery services could impact Instacart’s revenues.

Additionally, competition from giants such as DoorDash (NYSE: DASH), Uber Eats (NYSE: UBER), Amazon (NASDAQ: AMZN), and Walmart (NYSE: WMT) presents challenges in market share, especially for smaller orders.

IPO Drawing Attention

PepsiCo (NASDAQ: PEP) has shown confidence in Instacart’s potential, committing to a $175 million investment in preferred convertible stock as part of the IPO.

This investment, along with the interest from other major players, underscores the market’s belief in Instacart’s growth trajectory.

Company Outlook and Guidance

Instacart’s future strategy revolves around technology and diversification. The company plans to continue its push into enterprise technology, offering solutions to grocers lacking the resources for a digital transition.

While Instacart acknowledges that the growth rates seen during the pandemic might not continue, its investments in technology and advertising position it well for sustained expansion.

However, with strategic investments, a focus on technology, and a clear understanding of consumer behavior, Instacart seems poised for a promising future in the industry.

Instacart by-the numbers

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Charles Buttner is a tech news editor and reporter.

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