On Thursday, Bernstein made a notable change to its stance on Instacart (NASDAQ:CART), upgrading the stock from Market Perform to Outperform and increasing the price target to $43, up from the previous target of $30. The adjustment follows Instacart's recent fourth-quarter performance, which led analysts to develop a more optimistic perspective on the company's potential for Gross Transaction Value (GTV) growth.
Instacart is expected to overcome previous headwinds from Electronic Benefit Transfer (EBT) Supplemental Nutrition Assistance Program (SNAP) challenges. Additionally, the negative effects from its customer base acquired during the 2020/21 COVID-19 pandemic are diminishing.
The company's guidance for the first quarter suggests that high single-digit to low double-digit GTV growth is achievable in the near term. This projection contrasts with the consensus, which anticipates GTV growth of merely 5-6% for Instacart.
The firm believes that guidance provided for the second or third quarter could act as a catalyst for positive revisions to GTV forecasts. With Instacart trading at 10 times adjusted EBITDA, these anticipated improvements in GTV are seen as sufficient to prompt a revaluation of the stock to higher levels. The analyst's commentary highlighted that the consensus may have underestimated Instacart's growth potential, setting the stage for a potential upward movement in the stock's valuation.
InvestingPro Insights
Instacart's (NASDAQ:CART) recent performance has caught the eye of analysts and investors alike. With an adjusted market capitalization of $9.42 billion and a noteworthy revenue growth of 19.25% over the last twelve months as of Q4 2023, the company is showing promising signs of expansion. The gross profit margin stands out at an impressive 74.88%, underlining Instacart's ability to maintain profitability on its sales.
InvestingPro Tips for Instacart suggest further optimism. The company holds more cash than debt on its balance sheet, providing financial flexibility and stability. Moreover, analysts have revised their earnings upwards for the upcoming period, indicating confidence in the company's future performance. With net income expected to grow this year, investors may find Instacart's prospects particularly enticing. It's worth noting that while the stock is currently seen as overbought according to the RSI, the strong return over the last three months of 35.8% could signal sustained investor interest.
For those seeking a deeper dive into Instacart's financial health and future outlook, there are an additional 11 InvestingPro Tips available. To explore these insights and make an informed investment decision, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/CART.
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