Investing.com – Mizuho (NYSE:) Securities initiated research on Instacart stock on Monday, giving it an Outperform rating and a $55.00 target price.
“We believe Instacart's category-leading position in grocery delivery is undervalued,” analysts led by James Lee said in a note.
Instacart (NASDAQ: ) shares rose 1.5% in premarket trading Tuesday.
Mizuho analysts believe that competitive concerns surrounding Instacart are overstated, due to the company's deep integration of technology with customers, including inventory management and specialized delivery personnel. This combination, they say, results in a superior user experience that is difficult for competitors to duplicate.
Mizuho praises Instacart's plan to invest in order to grow in a market with a total addressable market (TAM) of 1.2 trillion dollars and only about 5% penetration of delivery services.
Instacart's moves to lower grocery prices have boosted transaction value (GTV) growth to double digits annually through 2024. In addition, the integration of loyalty programs and dynamic pricing solutions is expected to make grocery prices more affordable for consumers.
The report also emphasized the role of advertising in financing Instacart's growth investments, with the expectation that it will drive EBITDA over time.
Analysts at Mizuho believe that the company's long-term EBITDA expectations are conservative, and estimate that a 1% increase in take-up levels could result in more than a 20% increase in EBITDA. This view is supported by their forecast that Instacart's fiscal year 2027 EBITDA will be about 15% above street expectations.
In the valuation, Mizuho argues that Instacart stock has an attractive valuation of 9 times fiscal year 2026 EV/EBITDA, which is a discount to their estimated compound annual growth rate (CAGR) of more than 10%.
“We believe the stock should trade at a growth rate as competitive concerns diminish,” the analysts continued.
The 55% valuation set by Mizuho represents 11 times the estimated fiscal year 2026 EBITDA, which is in line with the company's expected growth path.
Elsewhere, BTIG analysts also upgraded their rating to Buy from Neutral, citing strong order growth forecasts and forecasts that are “not particularly challenging.”
“With the growing majority of consumer-facing Internet, we were looking to increase exposure to pockets of growth in the country and grocery delivery to match the debt,” the analysts wrote in a note to consumers. “Our tracking points to accelerate the growth of the order, and we take the fourth quarter and the forecast of 2025 above-Street. Finally, with the forecast and the stock down from the third quarter of the print, we see an attractive price and finally pull the trigger. .”
Instacart stock currently carries 15 Buy ratings, 15 Neutral ratings, and no Sell among Wall Street analysts.