Instacart, the popular grocery-delivery app, continues to face challenges as Wall Street analysts advise against buying its shares. Gordon Haskett's Robert Mollins recently started coverage of Instacart with a hold rating and a stock price target of $31, just $1 higher than the company's initial public offering price.
Three other analysts surveyed by FactSet have also given neutral ratings to Instacart. It is worth noting that none of these analysts are affiliated with the 20 underwriters of the IPO.
The stock has experienced a 6.1% decrease in midday trading, reaching its lowest closing price since going public on September 19. This marks the fifth consecutive close below the $30 IPO price.
Expert Insights: Doubts Surround Instacart's Future Despite Price Drop.
Rollins from Gordon Haskett is cautious about Instacart for several reasons. He questions whether the adoption of online grocery delivery will continue to rise, especially as consumers become more cautious about their spending habits.
Online Grocery Delivery Demand Declining, Raises Concerns for Instacart
According to recent survey data, consumer demand for online grocery delivery has significantly decreased in recent months, though not as much as initially predicted. Analysts suggest that this decline is relative to the high demand experienced between 2020 and 2022.
However, there are other concerns for Instacart. One major worry is the growing competition in the market. Instacart already holds a portion of the market share, but this encroachment from rival companies could pose a significant risk.
While Instacart is projected to slightly outperform its competitors in terms of profit margins, there are still several risks in play. Analysts argue that there are not enough catalysts to excite investors about the company's current valuation discount.
Currently, Instacart holds a market capitalization of $7.71 billion. This is notably lower than its IPO valuation, which was around $10.2 billion.
Since its initial closing price at $33.70, which was 12.3% higher than its IPO price, the stock has seen a significant decline of 17.3%. Comparatively, the Renaissance IPO ETF IPO only experienced a minor decrease of 0.7%, and the S&P 500 index declined by 3.5% during the same period.