It may be too early for investors to start checking out shares of Instacart , according to Needham. Analyst Bernie McTernan initiated coverage of the grocery delivery company with a hold rating, citing concerns over rising competition and slowing penetration in a Tuesday note to clients. “We see a balanced risk reward reflecting slowing growth in the years following a pandemic-driven demand surge and CART’s already scaled advertising business,” he wrote, adding that shares look fairly valued when compared to other high-margin and lower-growth names. The commentary from Needham follows Instacart’s closely watched Nasdaq debut . Shares popped roughly 40% to open at $42 on Tuesday, but later pared the gains to close up 12%, which was above its $30 offering price, and a roughly $11 billion valuation. CART 1D mountain Share performance since IPO Instacart triumphed during Covid-19 pandemic shutdowns, which pushed more consumers toward online grocery delivery. The trend boosted the company’s compound annual growth rate nearly 130% between 2019 and 2022, with Instacart expected to post more than $1 billion in adjusted EBITDA in 2023, according to Needham. But McTernan anticipates a difficult three years of growth ahead as competition from Uber , DoorDash , Amazon and Walmart — in addition to rising customer acquisition costs — threaten to eat away at strong margins. “Despite this success, we believe the next few years will be more difficult as the industry digests online penetration gains and CART’s market share could be diminished by competition,” he said. “Given this backdrop we see more downside than upside risk to estimates, which we think will weigh on the valuation investors are willing to pay,” he added. — CNBC’s Michael Bloom contributed reporting.
