Instacart (NASDAQ:CART) shares are struggling for direction Thursday as Wall Street digests Q1 results where the company showed an increase in both profit and sales indicating strong execution and the potential for growth going forward. The company said revenue was up 8%, new orders increased 9%, while gross transaction volume, a metric the company relies on to determine stability, increased 11% to a post-IPO record of $8.3B.
So why are shares still moving lower? On the company’s earnings call, new CFO Emily Reuter cautioned that while the
Uber (UBER) partnership has the potential to drive more value to customers and growth to the company’s retail partners, the impact won’t materially impact Q2 financials.
Reuter added that the strong performance in Q1 was the benefit of all of the company’s cohorts and is unlikely to be repeated in Q2.
“Year-over-year headwind improved from Q4 to Q1 so the impact was strongest in Q4 [while the] launches of Kroger (KR) and Costco (COST) helped mitigate that impact. As we move into Q2, we do expect to lap the expiration of those benefits,” Reuter said on her first earnings call with Maplebear (CART), more commonly known as Instacart.
Morgan Stanley analyst Brian Nowak sees a “solid foundation” for Instacart (CART) and expects product improvements and gross transaction value acceleration to lead to improved ad penetration.
But Nowak maintained his Equalweight rating in respect of increased competition from Amazon (AMZN) and Walmart (WMT), and to a lessor extent from DoorDash (DASH) and Uber (UBER), and will wait to see if Instacart (CART) can “durably” withstand this pressure to limit share loss.
Nowak raised his price target 7.5% to $43 in line with other Wall Street firms. Citigroup, Barclays, Piper Sandler all lifted their price targets by $2, with more substantial price hikes from JMP Securities (+$7), BMO (+$10), and Wedbush (+$7).
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