Instacart's IPO: Analyst Expresses Caution

Instacart, the popular online grocery delivery service, recently filed paperwork with the Securities and Exchange Commission (SEC) to become a publicly traded company. This move comes amidst a slow year for initial public offerings, given concerns surrounding rising interest rates, high inflation, and a potential recession. While some industry experts anticipate a rebound in tech IPOs, Gordon Haskett analyst Robert Mollins urges a note of caution.

Mollins states, "Our thorough examination of Instacart's S-1 filing, combined with our comprehensive data analysis and valuation work, has led us to approach CART's IPO with a fair degree of caution." In light of these concerns, Instacart declined to comment on the matter.

As Instacart prepares to go public and lists its shares on the Nasdaq with the symbol CART, market observers will be closely monitoring its performance and reception in the public market.

Instacart Faces Challenges Amidst Economic Pressure

One of the concerns raised by Mollins regarding Instacart's performance is the potential risks posed by a pressured consumer market. Despite a slowdown, inflation levels continue to remain historically high. In July, consumer prices saw a 0.2% increase, primarily driven by rising food costs. The burden of high grocery bills has been weighing on Instacart, according to Mollins.

Mollins also doubts that Instacart's customer income demographic is sufficiently superior to the overall U.S. market to shield the company from these consumer headwinds. This concern was emphasized in Instacart's S-1 filing, which stated that economic pressures have led to a reduction in the number of items customers purchase per order and a decline in demand for premium or discretionary grocery purchases.

Another area of concern highlighted by Mollins is Instacart's revenue streams. He argues that plain old grocery delivery is not a profitable business and requires advertising subsidies to sustain it. Furthermore, Mollins attributes the significant improvement in gross margin and adjusted Ebitda margin over the past few years more to Instacart's ads business than any other factor.

These challenges pose significant obstacles for Instacart as it strives to maintain profitability and navigate the dynamically changing consumer landscape.

# Instacart Revenue Breakdown

Instacart, the leading online grocery delivery platform, has witnessed significant growth in its revenue. The company's revenue is divided into two main segments: Transaction and Advertising and Other.

Advertising Revenue Surge

One noteworthy aspect is the remarkable surge in advertising revenue. In 2021, Instacart generated $572 million from advertising. This figure amplified to an impressive $740 million in 2022. Consequently, advertising revenue now accounts for approximately 29% of the total revenue generated by Instacart.

For more information or inquiries, please visit Instacart's official website.