The company began its roadshow with more humble aspirations, with a $7.7 billion to $9.3 billion range and shares at $26 to $28. After Arm Holdings’ recent success, the Instacart IPO price is up to $28 to $30 with a projected valuation of $9.3 billion to $9.9 billion. While the numbers are still well below the $39 billion pre-money valuation of March 2021, the company appears optimistic about its upcoming performance.

Instacart IPO Valuation: Does Its Financial Performance Hold Up?

The company has a host of different avenues it has its eyes set on, from its primary grocery delivery function to AI acquisitions to boost the services it can provide to grocery stores that are trying to catch up to the rest of the evolving market. With long-term goals of being a permanent player in the grocery ecosystem, the company appears well-placed to utilize the funding public trading can bring to it, however, investors are still wary of the IPO market. Choosing to invest in the Instacart IPO will require a close look at both the company’s financial performance as well as its predecessors that grew through the pandemic but were not able to keep their numbers up afterward.

Objectively looking at the company’s financial performance is a good way to estimate whether the Instacart IPO price is right for you. Their revenue has been growing well, averaging around 19.9% annually between 2020 and 2022. In the first half of 2023, they earned $1,475 million in revenue, which is a positive sign.

“Our GTV (Gross Transactional Value), representing the online sales we power for all of our retail partners, grew at a CAGR (Compound Annual Growth Rate) of 80% between 2018 and 2022, compared to 50% for the overall online grocery market and 1% for offline grocery.

In 2022, we generated approximately $29 billion of GTV, which makes Instacart the leading grocery technology company in North America,” the company stated in its IPO filings.

Instacart’s operating expenses have risen by a huge margin, from $954 million in 2020 to $1,769 million in 2022. However, the positive news is that the expenses for the first half of 2023 closely mirror those of the same period in 2022, along with a significant increase in gross profit. There is much to appreciate about the company’s past fiscal performance, and the current Instacart IPO valuation appears a reasonable ask from investors, but is its past growth enough of an indicator of future success?

The Growth Potential of the Online Grocery Market

The Instacart IPO filing overview mentions that 85% of the U.S. grocery market partners with the company, and that their retail partners are able to attract 7.7 million monthly active orderers who spend approximately $317 per month on average on the platform. Undeniably, the company holds a significant section of the market.

Incisiv’s 2022 report indicates that while national retailers like Walmart and Target remain the first preference for online shoppers, the preference for third-party delivery providers has grown by 7% from the previous year.

The report also indicates that only 12% of grocery sales happen via e-commerce platforms. Both factors are clear indicators that despite the popularity of e-commerce delivery services, there is still significant room for growth. The 2021 Bureau of Labor Statistics reports indicated that approximately $5,259 annually, or about $438 per month is spent on groceries in U.S. households. With the growth of food prices since then, these estimates are likely lower than the current rates but once Instacart’s growth matches these numbers, it is uncertain whether the company will gain further ground.

Apart from Instacart Marketplace and Instacart Enterprise Platform, its two business wings for retailers and their customers, Instacart Ads is another flourishing wing of the company. The company’s advertising capabilities have attracted brands such as PepsiCo Inc., which has also committed to buying $175 million of preferred stock from the Instacart IPO move.

Risks of Investing in Instacart Stocks

With the Instacart IPO date set for September 19, investors will soon be able to get a share of the company. With the roadshow drawing to an end and all of the Instacart IPO details out to sort through, the decision will largely depend on the market’s attitude toward IPO investments. The main risk of participating in the Instacart valuation process would be the possibility of the company’s performance stagnating or falling, just as other companies like DoorDash and Zoom experienced post-pandemic. While Instacart’s fiscal performance shows no signs of slowing down, there is still considerable doubt about how much more the company can grow. Many predict that the IPO interest in Arm Holdings might be indicative of an investor focus on the chips market rather than tech IPOs as a whole, and thus remain apprehensive about the increased Instacart valuation.

Instacart IPO Date is Here

Despite all the back-and-forth on the valuation, Instacart is ready with 22 million shares at $28-$30, set to begin trading under Nasdaq on 19 September. These Instacart stocks will be available under the “CART” ticker, for those keeping an eye on the company’s performance.

Instacart’s previous financial gains should be enough to convince the market to invest in Instacart stocks, however, the margin of success may not be as monumental as the recent IPO shakeup. The company’s performance will determine whether the IPO market is indeed resurfacing or whether Arm Holdings’ success was a momentary phenomenon.

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Instacart IPO Valuation

According to The Wall Street Journal, the core of Instacart’s business, its grocery delivery service, has slowed down considerably with gross transaction volumes increasing by only 4% to $14.9 billion. Transaction revenue has risen by 34% to $1 billion. The company’s attention, now centered on advertising and other technological services, witnessed a 24% growth to $406 million.

Instacart has already secured a deal with PepsiCo prior to the IPO, with a promised $175 Series A preferred stock sale. Many have wondered at PepsiCo’s decision as Instacart works more as a platform for retailers than brands, but the company’s support could be a big boost for the grocery delivery platform. Cornerstone investors such as Norges Bank and other entities have also expressed interest in up to $400 million from the company, as per Bloomberg.

The grocery delivery company has offered up 22 million shares in total, with 14.1 million being shares that are to be newly issued by the company and another 7.9 million shares from selling stockholders. Instacart’s IPO is likely to be set at an offer price between $26 – $28, with a hope to raise approximately $616 million.

Instacart: Bridging the Gap between E-commerce and Grocery Delivery

Founded in 2012 by entrepreneur Apoorva Mehta, the humble San Francisco-based startup has grown by leaps since its inception. With Fidji Simo currently at the reins as CEO, the company has made several acquisitions during its time, starting with Unata and going on to more recent ones like Rosie and Eversight, which have additionally marked the company’s journey toward AI. Instacart has also partnered with more than 1400 companies such as Aldi, Kroger, Lowes, etc. in order to take on Amazon, especially after the company’s acquisition of retail giant Whole Foods.

Instacart confidentially submitted its IPO filings to the U.S. Securities and Exchange Commission (SEC) in May 2022 but halted proceedings due to market complications. Its IPO filing in August 2023 indicates that the company is now ready to go through with the proceedings this time, soon to be listed under the “CART” ticker on the Nasdaq exchange. 

“Our GTV, representing the online sales we power for all of our retail partners, grew at a compound annual growth rate of 80% between 2018 and 2022, compared to 50% for the overall online grocery market and 1% for offline grocery. We have demonstrated our ability to help our retail partners drive strong growth and stay competitive in a complex and increasingly digital industry.”

– CEO Fidji Simo

Introducing Instacart in the prospectus, Simo explains that only 12% of grocery sales currently take place online.

In 2022, McKinsey reported that while the e-commerce boom during the pandemic was due to safety and convenience—factors that were no longer as pressing post-pandemic—consumers also enjoyed unique features that online platforms offered, such as product comparisons and personalized promotions. The research also indicated that 55% of surveyed retailers felt they were not equipped to attract the talent necessary to make the shift to digital commerce, with many worried about losing their market share during the online transition. This is where companies like Instacart are able to shine, and such factors are likely to help in Instacart’s valuation.

IPO Filings 2023

Stock Analysis reports that only 106 IPOs have entered the US stock market in 2023, a 31.17% drop from the 154 IPOs by this time in 2022. The IPO market has been largely latent since 2021. Following Instacart’s IPO filing, there is talk of whether the company will be able to perform better than its competitors like Lyft and Uber, which are still taking hits in regard to profitability. Hopes are higher for the gig economy company as it enters the market backed by multiple quarters of profitability. 

Another company to look out for is British chip designer ARM Holdings, which is owned by Japan’s Softbank Group. It is believed that the company could see a valuation of up to $52 billion and has already found major cornerstone investors like Apple, Intel, Nvidia, Advanced Micro Devices, and Samsung Electronics. Word of  Klaviyo and its $6.8 billion valuation is also of note as the marketing automation platform gets set to launch its roadshow.

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Instacart Turns to Selling Software 

In an interview with CNN Business this week, Instacart CEO Fidji Simo said the grocery delivery startup plans to roll out several new software services for its retail partners, including one called Carrot Warehouses, which aims to help grocers support 15-minute deliveries using the right tech infrastructure. 

Instacart has also  inked a deal with supermarket chain Publix to offer faster deliveries in Atlanta and Miami in the coming months. The new SaaS model will allow retailers to be in charge of inventory management and supply chain management. This comes in the form of: 

• E-commerce support: The right tools to help grocers build and manage their stores online.
• Fulfillment support: Instacart staff and new warehouses will help customers handle super-quick deliveries. 
• Advertising: The grocery startup will offer support to partner digital retail efforts, and 
• Software analytics, and in-store tech support that would allow groceries to be delivered within 15 minutes through its miniature fulfillment centers. 

With growing competition from existing unicorns such as Uber and DoorDash, Instacart is left with no choice but to dive into the software side of its operations to boost growth. With the right software infrastructure to enable ultrafast deliveries it can boost its gross margins, and create a stream of recurring revenue from large customers.

Instacart Valuation: A Show of Humility 

It’s rare to see a private unicorn adjust its valuation, especially when it is one of the few beneficiaries of the pandemic boom. Instacart’s valuation doubled twice during the pandemic to $39 billion and added 600,000 people as independent contractors under its wings. According to CNN Business, the exponential growth has since begun to stabilize.

Instacart’s valuation is seen as a way to boost the value of equity awards for new and existing employees. Employers are likely to be offered stock-based compensation that could add to their riches if the market interest in the grocery unicorn rebounds. 

Tech-enabled gig companies like Instacart, DoorDash and Uber often struggle to make profits in an increasingly tight race to shorten delivery time. Instacart’s new service could help the company create room for more profits and increase investor confidence ahead of its upcoming IPO later this year.

When asked about Instacart’s IPO plans, Simo declined to comment on timing. Although she said that the company plans to go public at some point in the future.

Instacart’s Total Funding 

According to market reports, Instacart’s revenues tripled to around $1.5 billion in 2020. The epic growth came with the onset of large capital injections. In June 2020, Instacart raised $225 million at a ballooning valuation of $13.7 billion. A month later, the grocery delivery startup added another $100 million to its cart to that round.

In October 2020, Instacart raised another $200 million pushing its valuation north of $17.7 billion. In March 2021, the company added another $265 million in private capital at a valuation of $38.7 billion. That’s a lot of money from investors, including Andreessen Horowitz, Sequoia Capital, D1 Capital Partners and others.

Other bigwigs in the advertising and delivery businesses, like DoorDash, Meta and Shopify, have also seen the value of their stock plummet in recent months.

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