The IPO market appears to be shaking off the dust and rising up to prepare for the Instacart IPO valuation. With Softbank’s Arm Holdings making a dazzling debut in the market, the attention is now on the Instacart IPO and how it is set to perform. The grocery delivery platform has had a strong run since its launch and after a failed start at going public in 2022, the company is almost in place with its share, with the Instacart IPO price date set for 18 September 2023.
The company began its roadshow with more humble aspirations, with a $7.7 billion to $9.3 billion range and shares at $26 to $28. After Arm Holdings’ recent success, the Instacart IPO price is up to $28 to $30 with a projected valuation of $9.3 billion to $9.9 billion. While the numbers are still well below the $39 billion pre-money valuation of March 2021, the company appears optimistic about its upcoming performance.
Instacart IPO Valuation: Does Its Financial Performance Hold Up?
The company has a host of different avenues it has its eyes set on, from its primary grocery delivery function to AI acquisitions to boost the services it can provide to grocery stores that are trying to catch up to the rest of the evolving market. With long-term goals of being a permanent player in the grocery ecosystem, the company appears well-placed to utilize the funding public trading can bring to it, however, investors are still wary of the IPO market. Choosing to invest in the Instacart IPO will require a close look at both the company’s financial performance as well as its predecessors that grew through the pandemic but were not able to keep their numbers up afterward.
Objectively looking at the company’s financial performance is a good way to estimate whether the Instacart IPO price is right for you. Their revenue has been growing well, averaging around 19.9% annually between 2020 and 2022. In the first half of 2023, they earned $1,475 million in revenue, which is a positive sign.
“Our GTV (Gross Transactional Value), representing the online sales we power for all of our retail partners, grew at a CAGR (Compound Annual Growth Rate) of 80% between 2018 and 2022, compared to 50% for the overall online grocery market and 1% for offline grocery.
In 2022, we generated approximately $29 billion of GTV, which makes Instacart the leading grocery technology company in North America,” the company stated in its IPO filings.
Instacart’s operating expenses have risen by a huge margin, from $954 million in 2020 to $1,769 million in 2022. However, the positive news is that the expenses for the first half of 2023 closely mirror those of the same period in 2022, along with a significant increase in gross profit. There is much to appreciate about the company’s past fiscal performance, and the current Instacart IPO valuation appears a reasonable ask from investors, but is its past growth enough of an indicator of future success?
The Growth Potential of the Online Grocery Market
The Instacart IPO filing overview mentions that 85% of the U.S. grocery market partners with the company, and that their retail partners are able to attract 7.7 million monthly active orderers who spend approximately $317 per month on average on the platform. Undeniably, the company holds a significant section of the market.
Incisiv’s 2022 report indicates that while national retailers like Walmart and Target remain the first preference for online shoppers, the preference for third-party delivery providers has grown by 7% from the previous year.
The report also indicates that only 12% of grocery sales happen via e-commerce platforms. Both factors are clear indicators that despite the popularity of e-commerce delivery services, there is still significant room for growth. The 2021 Bureau of Labor Statistics reports indicated that approximately $5,259 annually, or about $438 per month is spent on groceries in U.S. households. With the growth of food prices since then, these estimates are likely lower than the current rates but once Instacart’s growth matches these numbers, it is uncertain whether the company will gain further ground.
Apart from Instacart Marketplace and Instacart Enterprise Platform, its two business wings for retailers and their customers, Instacart Ads is another flourishing wing of the company. The company’s advertising capabilities have attracted brands such as PepsiCo Inc., which has also committed to buying $175 million of preferred stock from the Instacart IPO move.
Risks of Investing in Instacart Stocks
With the Instacart IPO date set for September 19, investors will soon be able to get a share of the company. With the roadshow drawing to an end and all of the Instacart IPO details out to sort through, the decision will largely depend on the market’s attitude toward IPO investments. The main risk of participating in the Instacart valuation process would be the possibility of the company’s performance stagnating or falling, just as other companies like DoorDash and Zoom experienced post-pandemic. While Instacart’s fiscal performance shows no signs of slowing down, there is still considerable doubt about how much more the company can grow. Many predict that the IPO interest in Arm Holdings might be indicative of an investor focus on the chips market rather than tech IPOs as a whole, and thus remain apprehensive about the increased Instacart valuation.
Instacart IPO Date is Here
Despite all the back-and-forth on the valuation, Instacart is ready with 22 million shares at $28-$30, set to begin trading under Nasdaq on 19 September. These Instacart stocks will be available under the “CART” ticker, for those keeping an eye on the company’s performance.
Instacart’s previous financial gains should be enough to convince the market to invest in Instacart stocks, however, the margin of success may not be as monumental as the recent IPO shakeup. The company’s performance will determine whether the IPO market is indeed resurfacing or whether Arm Holdings’ success was a momentary phenomenon.
