Instacart goes public tonight! Will it experience a significant surge on its first day, just like Arm did?
Instacart officially begins trading tonight with the trading code CART. Its IPO is priced at $30 per share, at the high end of the guidance range ($28-$30). After full dilution, Instacart's valuation will reach $9.9 billion.
Online grocery delivery giant Instacart officially began trading tonight with the ticker symbol CART, and its IPO was priced at $30 per share, at the high end of the guidance range ($28-30).
Earlier, chip design company Arm saw a nearly 25% surge on its first day of trading. As one of the representatives of the gig economy, how will Instacart perform tonight?
Valuation of over $10 billion, but close to $40 billion at the highest!
At the IPO price of $30, Instacart's fully diluted valuation will reach $9.9 billion.
In March 2022, the company valued itself at $24 billion, while a year ago, in a late-stage venture capital round, the company was valued at $39 billion.
As for how much investors are willing to pay for Instacart, it partly depends on their confidence in the future expansion and profitability of the gig economy.
Based on the $30 pricing, Instacart's price-to-sales ratio is 3.90x. The price-to-sales ratio of food delivery giant DoorDash is 4.2x. Other gig economy companies have lower price-to-earnings ratios, with Uber and Lyft having ratios of 2.8x each.
What are the risks?
Founded in 2012, Instacart generated $2.55 billion in revenue last year, a YoY growth of 39%. Fees paid by retailers and customers, including those from its premium membership program Instacart+, accounted for nearly three-quarters of its revenue. The remaining revenue comes from Instacart Ads, a relatively new but crucial service that saw a 30% YoY growth in its advertising business last year.
Risks that investors need to consider include increased interest in in-person shopping, rising food prices, and competition from its retail partners.
For example, Costco and Walmart both have their own delivery services. FreshDirect, Gopuff, and Misfits Market are Instacart's competitors in the delivery field.
David Trainer, CEO of investment research firm New Constructs, said, "Instacart faces increasingly strong competitors. This makes it more difficult for the company to maintain and capture market share, and weakens its ability to raise prices and maintain profits."
Instacart recorded losses in 2020 and 2021, with a net profit of $428 million last year, but over three-quarters of the profit came from what the company called tax benefits.