Is Instacart (CART) About to Disrupt the Grocery Industry?

Instacart (NASDAQ: CART) has quietly reshaped how we think about grocery shopping. 

The grocery delivery app currently boasts a leading market share in North American grocery delivery, partnerships with over 1,500 grocers (including 24 of the top 25), and coverage of 97% of U.S. households.

But do they have what it takes to keep disrupting and innovating in the grocery industry? 

Here’s why they might be the company best-positioned to capitalize on the growing trend of online grocery shopping.

Grocery Delivery: Big Growth Potential

Today, only about 12% of the $1.1 trillion North American grocery market happens online. 

As middle-class populations grow and consumer preferences shift toward convenience, online grocery delivery has ample room to expand. 

Instacart is already a leader in the space, capturing a significant market share of both large-basket ($75+) and small-basket grocery orders. 

With an average order value of $113 in 2023 and a focus on recurring, weekly shops, Instacart is targeting the part of the market that offers the highest profitability.

What Sets CART Apart

Instacart’s business model stands out in several ways:

1. Strong Customer Retention: Instacart customers nearly double their order frequency and spending within their first six years on the platform. This brand loyalty creates a reliable revenue base and supports future growth.
2. Ad Revenue Opportunity: Grocery delivery isn’t the only game Instacart is playing. The company’s growing advertising business—targeting consumer packaged goods brands—represents a high-margin revenue stream that has yet to be fully tapped.
3. Asset-Light Model: With 600,000 contract shoppers handling order fulfillment, Instacart avoids the capital-intensive burdens of running its own fleet, positioning it to generate strong free cash flow as it scales.
4. Strong Financials: Instacart boasts a pristine balance sheet with $2.1 billion in net cash. Its current valuation trades at a significant discount to gig-economy peers like Uber (NYSE: UBER) and DoorDash (NASDAQ: DASH), offering free cash flow yield of over 7%.

Top analysts are bullish on the name, ranking it a consensus buy:

You’ll also see their average forecast implies over 15% upside for CART from here, with the max forecast calling for over 38% gains.

See analyst price targets for CART.

CART is also checking some of our boxes for both growth and value:

• CART is good value based on its earnings relative to its share price (4.07x), compared to the US market average (27.47x)
• CART is good value based on its earnings relative to its share price (4.07x), compared to the US Internet Retail industry average (52.92x)
• CART's Return on Equity is forecast to be high in 4 years (21.78%); analysts are confident in the firm's ability to efficiently generate return on equity

Overall, CART has a B Zen Rating and an A Financials rating. You can see how it ranks for other components like growth, momentum, and more at the link below.

Click here to analyze CART.

Bottom line? Instacart’s dominance in grocery delivery, strong customer retention, and growing ad business make it a strong disruptor in the grocery industry. Its current valuation and long-term growth prospects make it an interesting GARP (growth at a reasonable price) name to keep an eye on.

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