The Dual-Edged Sword For Instacart - Dominating Market Share Yet Challenged By Retail Giants And Rival Platforms

Wedbush analyst Scott Devitt initiated coverage on the shares of Maplebear Inc CART d/b/a "Instacart" with a Neutral rating and a price target of $28.

While holding a favorable view of the business and management team, the analyst believes competitive dynamics in the industry will limit Instacart's long-term growth potential as the company faces pressure from retailers outside of its network, other intermediary platforms, and emerging first-party services from leading partners.

Even with an increasingly competitive market, the analyst thinks Instacart will maintain its prominent role in the industry as a technology partner for retailers with the scale of its fulfillment capabilities, access to incremental demand on its marketplace, and the ability to distribute ads across a broad network of retailers' owned and operated sites.

According to the analyst, these factors should support Instacart's continued growth alongside its partners as more of the grocery industry moves online.

Meanwhile, competitive and structural industry dynamics are likely to limit the company's growth prospects relative to the broader category, making the analyst take a Neutral view on shares, waiting for catalysts to reaccelerate the business.

Instacart has ~73% market share of the U.S. grocery intermediary category and ~18% share of U.S. online grocery.

However, the company's GTV growth is challenged by competition from other intermediaries like Uber Technologies Inc UBER and DoorDash Inc DASH and leading retailers like Amazon.com Inc AMZN and Walmart Inc WMT.

Despite slowing GTV growth, Instacart's advertising platform is early in its adoption and should continue to grow significantly faster than GTV, observed the analyst.

At the current levels, the analyst sees a balanced risk/reward, given the company's limited GTV growth despite its attractive margin trajectory.

Price Action: CART shares are trading higher by 0.29% at $25.65 on the last check Monday.