Instacart Gets Positive Analyst Reviews but Stock Stays Same

Instacart has reportedly garnered positive reviews from Wall Street analysts following its IPO.

As Bloomberg News reported Monday (Oct. 16), the online grocery delivery firm — which went public with an initial public offering (IPO) last month — has exited the “quiet period” for analysts that took part in its public listing.

And while no analysts recommended that investors buy its stock immediately after its listing, the company now has nine buy ratings, seven holds and one sell, the report said. Those ratings, Bloomberg added, did not help lift Instacart’s shares.

Among those reviewing the stock were analysts at JPMorgan, who said they liked Instacart’s “marketplace leadership position and first-mover tech advantage within a secular growth category, healthy profitability profile, and advertising potential.”

According to Bloomberg, the positive reviews are due in part to Instacart’s advertising business, which Piper Sandler’s Alexander Potter and Ben Johnson called a “profitability driver” that could not be matched by other gig-based platforms.

And Baird Equity Research analyst Colin Sebastian called it “one of the most successful roll-outs of retail media, perhaps only second to Amazon.”

PYMNTS CEO Karen Webster examined Instacart’s ad business in August, noting at the time that it makes up 30% of the company’s revenue.

“Advertising on the Instacart marketplace gives brands a way to promote their products — and first-party data that they don’t get when customers pull those products off their shelves in the store,” Webster wrote. “And they get that data without cannibalizing the grocery store channel that still drives most of their sales.”

And that first party data offers brands the ability to keep track of purchase trends and inform product and promotional strategies. At a time when grocery stores favor their own private label brands, Instacart’s ad platform offers brands a way to stay competitive.

“Brands also have a shot at putting the purchase of frequently purchased brand name products that are candidates for competitor subscription offerings back in the weekly virtual shopping cart, helped by digital coupons that brands can extend as an incentive to buy,” Webster added.

After going public last month, Instacart saw its stock climb as much as 43%, only to have those gains vanish in the days that followed.

“We believe 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,” Wedbush’s Scott Devitt and Michael Gerbino, who gave the stock a neutral rating, wrote in a note Sunday, per Bloomberg.