Instacart stock tumbled Wednesday after parent company Maplebear reported lower-than-expected fourth-quarter sales and gave a lower-than-expected outlook for the current quarter. Instacart's effort to boost affordability for grocery delivery and expand into restaurants could weigh on profitability, some analysts fear.
Instacart said that it earned 53 cents per share on sales of $883 million for the December-ended quarter. Analysts polled by FactSet projected the San Francisco-based company would earn 38 cents per share on $891 million in sales.
While the 10% overall revenue growth missed expectations, Instacart's marketplace processed $8.65 billion in gross transactions for the quarter, ahead of estimates of $8.62 billion. Meanwhile, Instacart's adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 27% to $252 million, compared with expectations of $240 million.
On the stock market today, Instacart stock lost 12% to close at 42.80. Shares broke below Instacart stock's 21-day and 50-day moving averages.
"Instacart continues to exhibit healthy core growth and we see the (after-hours) stock reaction reflecting a miss vs. elevated expectations into (the earnings report)," Morgan Stanley analyst Brian Nowak wrote to clients Wednesday. Nowak reiterated a neutral equal-weight call following the report.
Instacart Outlook For Q1
For the current quarter, Instacart guided for gross transaction value of $9.08 billion, based on the midpoint of its range. That was ahead of the roughly $9 billion analysts were looking for. But Instacart forecast adjusted EBITDA of $225 million for its March quarter, below the $237 million projected by analysts.
Maplebear Chief Executive Fidji Simo said in a shareholder letter that Instacart expects average order value will decline in Q1 "primarily driven by restaurant orders and our new $0 delivery fee on $10 minimum basket feature."
Simo wrote in the letter to shareholders that the Instacart app has "leading share of sales by far in both small and big baskets among digital-first players." Instacart is competing against DoorDash, Uber, Amazon and Walmart to deliver groceries to customers' doors.
While groceries are Instacart's main business, the company is pushing into restaurant deliveries. Last May, Instacart announced a feature allowing customers to order restaurant meals through the Instacart app, powered by a partnership with Uber.
Instacart collected $616 million in total Q4 revenue from transactions on its app, such as grocery orders. Meanwhile, the company sold $267 million worth of advertising on its app and other platforms during the fourth quarter. Both facets of Instacart's business grew 10% year over year.
"Investments in affordability and marketing contributed to a disappointing EBITDA outlook, questioning Instacart's ability to balance growth with profitability," Jefferies analyst John Colantuoni wrote. "We were encouraged to hear advertising penetration is expected to expand, although any benefit to margin appears offset by higher spending."
Colantuoni maintained a neutral hold call on Instacart stock following its Q4 report.
Needham analyst Bernie McTernan offered a more bullish take, reiterating a buy call following Instacart's report.
"We see a path to accelerating order growth through (first half of 2025), although the investments necessary to drive this growth will likely face increased investor scrutiny," McTernan wrote to clients Wednesday. "Ultimately we think (gross transaction value) accelerating should yield margin expansion, especially if it can kick-start advertising growth reacceleration."
Instacart Stock: Technical Ratings
Including Wednesday's slide, Instacart stock has gained 3% so far this year and 36% in the past 12 months. Instacart parent Maplebear went public in September 2023.
Coming into the report, Instacart stock had an IBD Composite Rating of 76 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
But Instacart's IBD Relative Strength Rating was a strong 93 out of 99. The RS Rating means that Instacart has outperformed 93% of all stocks in IBD's database over the past year.
