Piper Sandler bullish on Instacart stock citing accelerating growth and profitability

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On Friday, Piper Sandler showed a positive outlook for Instacart (NASDAQ:) shares, raising the price target to $45 from the previous $36, while maintaining an Overweight rating. The firm noted that Instacart’s growth rates, despite being lower in 2023 due to tougher comparisons, have accelerated each quarter throughout the year. The expectation is for mid-single-digit (MSD) growth in the next year, suggesting a further deceleration year-over-two-years.

Instacart’s business model has already reached profitability, which adds to the company’s favorable assessment. Piper Sandler highlighted the grocery category within the Gig Economy as particularly interesting, citing large order sizes and frequency as key factors. Additionally, the advertising segment of Instacart’s business was recognized for its compelling nature and higher margins.

The analyst pointed out that Instacart’s stock is trading at a high-single-digit (HSD) enterprise value to estimated 2025 EBITDA, which is significantly lower compared to the average of the group at approximately 15 times and the leader Uber (NYSE:) at around 21 times. According to Piper Sandler, this discrepancy suggests that Instacart may be positioned for a “catch-up trade.”

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