Instacart will struggle as competition heats up, Wedbush says

Wedbush Securities downgraded Maplebear (Instacart) to Underperform from Neutral, cutting its price target to $42 from $55, citing intensifying competitive pressures, particularly from Amazon's expanded same-day grocery delivery service. The firm anticipates Instacart's market share will erode, noting a decline to 58% in 2024 from 70% two years prior against rivals like Uber and DoorDash, and expects increased spending on incentives will limit future growth visibility. This downgrade follows significant pressure on Instacart shares, though over half of analysts covering the stock maintain a bullish rating.

Analysis

Wedbush Securities has significantly altered its outlook on Maplebear (CART), issuing a downgrade to Underperform from Neutral and slashing its price target to $42 from $55. The primary catalyst for this revision is the intensifying competitive landscape, specifically the recent expansion of Amazon's same-day fresh food delivery service into over 1,000 U.S. cities. This move is seen as making the Amazon Prime subscription a more compelling value proposition for grocery shoppers, directly threatening Instacart's market position. Evidence of this competitive pressure is already materializing, with the analyst noting Instacart's market share among intermediaries has deteriorated from 70% two years ago to approximately 58% in 2024, with rivals like Uber and DoorDash also gaining ground. The expected financial repercussions include a deceleration in gross transaction value (GTV) growth to the low-to-mid single digits and pressure on profitability, as the company will likely need to increase spending on incentives and marketing to defend its market share. This outlook, which contributed to a nearly 3% premarket drop in the shares, contrasts with the broader analyst community, where 18 out of 34 analysts maintain a bullish rating, indicating a significant divergence in opinion on the company's ability to navigate these threats.

Key Decisions for Investors

• Investors should re-evaluate long positions in Maplebear, as the documented market share decline to 58% and direct competition from Amazon's expanded delivery service provide a fundamental basis for Wedbush's bearish $42 price target.
• Closely monitor Instacart's upcoming quarterly reports for GTV growth and margin trajectory, as any further deceleration beyond the forecasted low-single-digit growth would validate the new, more cautious outlook.
• Consider the strategic risk that Instacart's largest retail partners may increasingly favor their own first-party delivery offerings, which could accelerate the erosion of its competitive moat and market share.
• Acknowledge the significant split in analyst sentiment, as the 18 bullish ratings suggest a potential risk for short positions if Instacart management successfully executes a strategy to defend its niche with regional grocers.