Instacart (CART)

Hey guys, been doing a lot of research, continuing to grow in this a bit. CART is a pitch from a few months ago, and I don’t love it that much tbh, but I think it is a signpost of where I was. Working on something right now that I think will be interesting and planning on posting a lot this summer when I will just be working on this stuff. Anyways, here’s the two-pager I submitted to a few spots.

Takeaway: Instacart's (NASDAQ: CART) has seen its multiple (EV/EBITDA) compress by 7x over the 18 months due to a host of factors. Management turnover and macro fears likely have a part to play, but Amazon’s (NASDAQ: AMZN) entrance has contributed to the vast majority of pessimism. Through research on company structure and a crucial trial program, I have come away with the belief that CART will re-rate over the coming 24 months, reverting to the mean based on unchanged, and strong, fundamentals.

Business/Industry Overview–-Instacart’s (NASDAQ: CART) revenue is derived from transaction fees, advertising sold to CPG retailers, and enterprise solutions. The U.S. grocery delivery industry grew ~10.5% in FY ‘25, versus in-person shopping, which saw its sales grow ~3% in ‘25. By 2033, grocery delivery will have an estimated TAM of ~$1T vs. ~$170B today, of which CART holds ~21%. Sub-2hr delivery is expected to grow at a ~20% CAGR through 2031.

Setup–On August 12th, Amazon (NASDAQ: AMZN) announced it was expanding into same-day delivery of perishables in 1,000 cities with 2,300 targeted by end of year. Worsening CCI numbers have also had a persistently negative affect on the company. Comps UBER (NYSE: UBER) and DoorDash (NASDAQ: DASH) trade at ~23x and ~49x EV/EBITDA, compared to CART’s 14x.

Investment theses–(1) AMZN does grocery fulfillment primarily through their warehouse network, retro-fitting substantial parts of their current network to handle grocery capacity. This makes their expansion more directly competitive to in-person grocers and Walmart (NYSE: WMT). I see little threat from AMZN based on their current model, due to CART’s ability to grow through WMT’s presence, but instead from a trial-program, in which AMZN are testing sub-30 minute delivery via micro-fulfillment centers (MFCs). I estimated the SKU count of one of AMZN’s trial MFCs, a dark-store, to be ~7,000 via regulatory filings, which helped me find the approximate usable area of the MFC. A SKU count of ~7,000 lies anywhere from 1/4th to 1/6th of the typical SKU count of grocers selling through CART. This lack of comparative SKUs represents a clear deficiency in AMZN’s grocery structure and a moat-derived advantage for CART. 

The other half of the equation is speed, but I see flaws for AMZN there as well, despite the readily accepted narrative that they, the famously iterative logistics company, will make speed work. CART owns too much of an advantage based on pure structural differences.  In the same trial-area, CART has 17 stores within five miles of AMZN’s dark-store with twelve of them offering delivery at or under 30 minutes. This grocer-coverage, extrapolated nation-wide, makes CART insurmountably faster, especially in tandem with CART’s driver-base: 600,000 drivers actively fulfilling orders, with roughly half at the store or within a mile when an order is placed.
Finally, I see a tailwind in the form of price-parity. Previously, grocers have placed markups ranging from 10-25% on products sold through CART, but expansions from AMZN and others mean that this markup is something grocers cannot afford, and I believe that as grocers go to price-parity, keeping prices the same in-store as online, orders will increase by ~10% for these price-parity locations. AMZN’s effects will prove to be relatively minimal due to speed and selection faults, while its presence simultaneously pressures grocers on CART’s marketplace to lower prices.

(2) AMZN’s threat has distracted the market from CART’s Storefront program. Through the Storefront platform, CART builds out monetization for grocers, and provides a full-featured grocery e-commerce site, handling online ordering and checkout, with optionality to plug-in more of CART’s stack as needed. Storefront operates virtually unencumbered by competition, with significant market to address, especially after the acquisition of Wynshop, which had been CART’s only major, grocery-native competitor. Two smaller players remain in this space: one with an employee count less than 40, and the other with an annual revenue less than $2 million. Storefront more than doubled in size in FY’25, and I see limited risk of future competitive displacement because of CART’s scale, and the first movers advantage it continues to compound. I see incremental upside as CART captures this secular tailwind due to scope and lack of competitive alternatives.

(3) In late-January, CART announced that they were bringing same-day delivery to Europe for the first time via their Storefront contract with Costco (NASDAQ: COST). I see this expansion as being the beginning of a fruitful expansion to Europe as CART leverages its aforementioned suite of technology services to modernize European logistics. These markets are very much raw, and outside of the largest grocers—Tesco, Lecler, Edeka—who run their own fulfillment networks, grocery delivery has significant room for optimization. One company has been pushing for logistics market share, Ocado (LSE: OCDO), in the UK. They use a warehouse structure similar to AMZN. However, OCDO is under significant strain, recently being forced to re-finance a $300m note up to an 11% rate, quadrupling their annual interest bill. This company, with $1.4B in net debt, and partners like Kroger (NYSE: KR) and Sobeys (TSX: EMP.A) paying significant fees to get out of deals, is decidedly not healthy. I do not see bankruptcy as an immediate potentiality, but because of their cash crunch, I see a vacuum of competition and upside for CART.

Valuation–

From a reverse DCF, I found that in order to justify its current price, CART would have to grow revenue at a 2.8% CAGR over the next 5 years. Even under the most pessimistic beliefs on take rate pressure, GTV headwinds, and advertising slowdown, this price would still be excessive.

Risks–AMZN has maintained that it is eager for Fresh to maintain profitability throughout its expansion. If priorities change, AMZN could pursue a dark-store heavy strategy where they aggressively buy and convert parcels of land in urban areas to these MFCs, which, while costly, would put them in a better position to challenge CART’s coverage. While CART has continued to grow GTV despite worsening consumer confidence, if the macro environment continues to worsen, advertising budgets from CPG retailers will shrink, making CART’s margin uplift virtually impossible. Regulation on gig-worker pay is always a concern, and progressive bills in California and New York, if extrapolated, could provide a headwind.

Catalysts–Repeated beats on GTV growth during 1H ‘26, despite management optimism, will dispel fears of excessive churn. Structural re-rating will occur in 2H ‘26 on the heels of sustained GTV acceleration due to pricing parity trials building out order growth by 100-200 bps and advertising growth due to enterprise buildout. Ocado struggles, combined with CART improvement, will lead to several contract wins in Q4 ‘26 and Q ‘27, causing a re-rate as investors price in European optimism.