CART shares fall on concerns about fourth-quarter 2024 guidance News ad

Maplebear Inc. NASDAQ: CART best known as Instacart, the world’s largest online grocery store with a network of more than 80,000 stores. Although you might have thought that it is just a food delivery app like DoorDash Inc. NASDAQ: DASH or Uber Eats (owned by Uber Technologies Inc. New York Stock Exchange: UBER), it turned into something more. The company now offers a suite of enterprise solutions for retailers, including digital in-store price tags, personalized advertising and expanded delivery partnerships with non-food retailers.

Despite comfortably beating consensus estimates, shares of the retail-wholesale company fell 12% after reporting third-quarter 2024 earnings due to conservative guidance for the upcoming quarter. Investors may consider the sale an early Christmas present and buy shares on pullbacks.

Overcoming the Digital Shopping Experience

Maple Bear today

$43.67 +0.23 (+0.53%)

(As of 11/29/2024 5:27 PM ET)

52 week range

$22.13

▼

$50.01

P/E ratio

29.31

Target price

$47.29

The Instacart app allows users to browse items from local grocery stores and have them delivered or schedule pickups. It also allows users to use digitized local weekly flyers with coupons and loyalty programs to earn points and discounts they would normally receive at the store.

The company has expanded its network of retailers to include more than just grocery stores, including Best Buy Co Inc. New York Stock Exchange: BBY, Costco Wholesale Company. NASDAQ: VALUE, Walgreens Boots Alliance Inc. NASDAQ: WBA, Walmart Inc. New York Stock Exchange: WMT, Home Depot Inc. New York Stock Exchange: HD and Sephora.

Instacart is improving the in-store shopping experience with its tactical rollout of Caper Carts. These are AI-powered smart carts that identify, weigh and scan the items in your shopping cart, automatically charging your payment method at checkout without having to wait in store checkout lines.

Earnings were stable in the third quarter; Management disappoints markets

Instacart reported solid third-quarter earnings, beating consensus EPS estimates by 20 cents and earning 42 cents. Revenue rose 11.5% year over year to $852 million, well above the consensus estimate of $844.03. Gross transaction volume (GTV) grew 11% YoY to $8.303 billion on 72.9 million orders, up 10% YoY. Adjusted EBITDA grew 39% YoY to $227 million, representing 2.7% of gross revenue and 27% of total revenue. Average order value (AOV) increased 1% year over year, indicating that consumers are still trying to control costs. Advertising revenue rose 11% YoY to $246 million, driven by growth in emerging brands as larger consumer brands faced some weakness.

While these were good results, the disappointment stems from a perceived slowdown in growth based on fourth-quarter guidance. Instacart expects GTV to be between $8.5 billion and $8.6 billion and adjusted EBITDA to be between $230 million and $240 million. GTV’s guidance calls for growth of 8% to 11% YoY, a sequential decline from GTV’s growth at 3Q, amounting to 11% YoY. The disappointing adjusted EBITDA range, which was barely above the third quarter range, was driven by reinvestment in marketing incentives and reinvestment in available service options.

Could Instacart be underestimating?

While GTV points to a potential slowdown in growth in the fourth quarter, it’s also possible the company is lowering estimates just in case. To prove this, we have to look at GTV’s Q3 growth estimates of 8% to 10% YoY, which the company beat at 11% YoY. Adjusted EBITDA was also at the higher end of the forecast range. Again, this could be a case of déjà vu, as with under-promising and over-delivering.

Instacart still dominates the grocery delivery market

Instacart also offers restaurant food delivery through a partnership with DoorDash, and DoorDash and Uber Eats have also begun offering grocery delivery. However, the Instacart app has become much more seamless and sophisticated with the addition of digital flyers, acceptance of Snap EBT, and inclusion of loyalty programs. Instacart also offers subscription memberships that may include free delivery. Its app uses machine learning models and streaming data to provide real-time inventory tracking whenever possible. Instacart has 85% of the US grocery market.

CART triggers a breakout of the ascending channel

An ascending channel describes an uptrend consisting of rising (rising) resistance from an upper trend line and rising support from a lower trend line representing higher highs and higher lows. This indicates that demand continues to increase while supply continues to decrease. However, a breakout occurs if the stock falls completely below the lower support of the trend line.

CART formed an ascending trading channel that peaked around the $49.91 Fib level. The third-quarter earnings reaction triggered an 11% selloff, pushing CART below its lower support line at $45.50. The daily flat support VWAP is $39.58. The daily RSI fell to the 41st range. Fibonacci Fib retracement support levels are at $40.49, $37.69, $34.52 and $29.97.

CART’s average consensus price target is $47.29 which implies a growth potential of 12.6%., and his highest analyst price target is at US$60. It has 13 analyst “Buy” recommendations and 12 “Hold” recommendations. The stock’s short interest is 7.06%.

Actionable Option Strategies: Bullish options investors can buy CART stock on the pullback using cash-backed puts at Fibonacci retracement support levels, or consider buying CART stock on the pullback. bull call debit spread for a lower cost to limit the downside while the potential benefit is limited.

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