Uber Technologies Inc UBER is reportedly considering the acquisition of grocery delivery company Instacart, according to a recent analyst report. The news has significantly impacted Instacart’s CART stock, which experienced a notable surge.
What Happened: Barron’s reported on Wednesday that Instacart’s stock price saw a substantial increase on Wednesday following speculation by a Wolfe Research analyst, Deepak Mathivanan, that the company could be a potential acquisition target for Uber.
Mathivanan upgraded Instacart’s rating from Peer Perform to Outperform, setting a target price of $35. This led to a 6.7% increase in the stock price, which reached $25.48. The analyst suggested that the stock is currently attractive and could see improved performance, potentially through a merger with Uber.
Instacart, which went public in September under the name Maplebear, has been facing pressure due to concerns about its growth prospects. Mathivanan believes the company is not fundamentally flawed, as indicated by its low valuation of around six times forward EBITDA.
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Mathivanan outlined three main reasons why Uber might be interested in acquiring Instacart. Firstly, it would expedite Uber’s entry into the $1 trillion grocery sector. Secondly, there could be significant revenue and cost synergies. Lastly, the analyst sees minimal regulatory risk, given Uber’s small market share in grocery delivery.
He also noted that Instacart had approached both Uber and DoorDash in 2021 about a potential acquisition. Mathivanan suggested that Uber could pay up to $40 per share for Instacart and still benefit from an accretive transaction.
Why It Matters: This potential acquisition comes at a time when Instacart is facing challenges from retail giants and rival platforms. Despite this, the company is expected to maintain its prominent role in the industry due to its technology partnership with retailers and its scale of fulfillment capabilities.
Uber’s interest in Instacart also follows its recent collaboration with Tesla to drive electric vehicle (EV) adoption.
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