Needham upgrades Instacart to buy, sees 43% upside

Investing.com -- Needham upgraded Instacart ( Maplebear Inc.) (NASDAQ: CART) to "Buy" from "Hold," setting a price target of $56, while it added the stock to its conviction list.

“We think the risk reward in the shares is compelling with an $80 bull case and floor that should be supported by the potential to benefit from M&A,” analyst wrote.

The brokerage noted stronger-than-expected 2024 results, stable COVID-era cohorts, and growing post-COVID customer additions as key drivers for consolidated gross transaction value growth.

Needham projects low-teens GTV growth over the next two years, with a 30% adjusted EBITDA CAGR in its bull case.

Instacart’s competitive edge lies in its leading customer experience, which continues to improve. Recent results eased concerns about competition and total addressable market limits, the firm noted, highlighting Instacart’s advancements in affordability, efficiency, and speed.

Needham noted a potential for M&A between Instacart and Uber (NYSE: UBER) adding, “We see the industrial logic for a transaction helping UBER solve the grocery product, diversify bookings away from mobility depending on your view on the threat from AVs and help further ramp up UBER's retail media network.”

Needham sees potential for M&A as a floor for shares, though challenges remain for a deal. The $56 target implies a 43% upside, while the bull case suggests an $80 valuation, offering 80% upside.

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