Instacart Stock: Mizuho Upgrades to 'Buy', Shares Climb

Instacart, the leading grocery delivery service, has received a significant boost in confidence from Mizuho analyst Bernie McTernan, who upgraded the stock to 'Buy' on Monday. This upgrade comes amidst concerns about competition and market pull-forward, which McTernan believes have been overblown. In this article, we will explore the reasons behind this upgrade, Instacart's recent performance, and its growth prospects, which justify its current valuation.



Instacart's Strong Results in 2024
McTernan's upgrade was driven by Instacart's strong results in 2024, which showed that the company's business is more resilient than previously thought. Despite fears that the pandemic drove an unsustainable jump in demand, Instacart has demonstrated stronger than expected staying power among customers who started using the service during the pandemic. This indicates that Instacart's best-in-class customer experience, which they continue to improve, is a significant factor in maintaining customer loyalty.

Post-Covid Cohorts Driving Growth
Recent results suggest that post-Covid cohorts can drive consolidated gross transaction value (GTV) growth while Covid cohorts remain stable. This is likely driven by Instacart's best-in-class customer experience, which they continue to enhance. This growth potential is a positive sign for Instacart's future prospects, as it indicates that the company can continue to expand its customer base even as the pandemic's impact on consumer behavior wanes.

Supply Advantage Over Uber and DoorDash
Needham found that Instacart has a supply advantage over Uber and DoorDash, which could help it maintain its market position. This advantage, combined with Instacart's focus on affordability through low-cost delivery options and loyalty program integrations, addresses a key pain point for customers and makes it more likely that they will continue using the service.

Instacart's Recent Performance and Growth Prospects
Instacart's recent performance and growth prospects can be seen as justifying its current valuation, given its strong financial results, expanding user base, and strategic partnerships. In its most recent third quarter earnings report, Instacart beat expectations with earnings of 42 cents per share and sales growth of 12% to $852 million. This demonstrates the company's ability to generate revenue and maintain profitability.

Instacart now serves more than 85% of U.S. households and approximately 70% of Canadian households, indicating a large and growing user base that drives demand for the company's services. Additionally, Instacart has formed partnerships with major retailers, such as Costco and Sam's Club, which help expand its product offerings and strengthen its market presence. These collaborations also provide a steady stream of revenue through commissions and delivery fees.

Instacart's growth prospects are promising, given the increasing demand for online grocery delivery. The company has adapted to this trend and continues to innovate, such as with the introduction of Instacart Express, a subscription service for regular users. This service offers unlimited free delivery, providing a steady revenue stream and encouraging customer loyalty.

Market Leadership
Instacart's dominant position in the online grocery delivery market, with nearly half of the market share, further supports its valuation. The company's ability to maintain this leadership position in a competitive market is a testament to its strong business model and execution.

Strategic Partnerships and Acquisitions
Strategic partnerships and acquisitions play a crucial role in Instacart's future growth, as they enable the company to expand its reach, enhance its offerings, and strengthen its market position. Instacart has formed strategic partnerships with major retailers, entered the Canadian market, acquired other grocery delivery services, and partnered with Google to integrate its grocery delivery service into the Google Assistant platform. These partnerships and acquisitions have allowed Instacart to expand its reach, enhance its platform, and better compete with other grocery delivery services.



In conclusion, Mizuho analyst Bernie McTernan's upgrade of Instacart to 'Buy' is justified by the company's strong results in 2024, post-Covid cohort growth, and supply advantage over competitors. Instacart's recent performance, growth prospects, and market leadership further support its current valuation. Strategic partnerships and acquisitions will continue to play a crucial role in Instacart's future growth, enabling the company to expand its reach and strengthen its market position. As an investor, keeping an eye on Instacart's progress and market conditions will ensure that this valuation remains accurate and sustainable.