Instacart (NASDAQ:CART), the dominant force in US grocery delivery, is experiencing a dramatic stock value fall, nearly nullifying the 43% increase it saw on its opening trading day.
Closing at $30.10 on Wednesday, the company’s share price barely stayed above the $30 IPO mark, even dipping below it earlier in the day.
This drop aligns with a downturn in the broader stock market, influenced by recent statements from the Federal Reserve. Adding to Instacart’s woes, Needham’s analyst Bernie McTernan initiated a middling ‘hold’ rating on the stock.
He cited increasing competition from Uber Technologies (NYSE:UBER) and DoorDash (NYSE:DASH), as well as a decline in the pace of online grocery sales, as areas of concern. Instacart is now focusing on diversifying revenue sources like advertising and data analytics to boost profits.
Consumer Behavior Shifts
According to Phil Lempert, a respected grocery industry analyst, consumers are returning to in-store shopping, which could be detrimental for Instacart. Lempert also pointed out that the quality of service from third-party pickers like Instacart has often lagged behind that of supermarket staff. This has led to a consumer trend favoring ‘click and collect’ options over home delivery.
Investment banks that facilitated Instacart’s IPO are currently in a quiet period, refraining from commenting on the company’s stock performance.
A Warning for Tech IPOs
Instacart’s quick reversal serves as a cautionary example for tech firms contemplating going public. The company’s market value declined by nearly $1 billion in just a single day, emphasizing that high valuations are far from guaranteed. This comes on the heels of similar post-IPO declines by companies like Arm Holdings (NASDAQ:ARM), owned by SoftBank Group Corp. (OTC:SFTBY).
Despite the recent downturn, Instacart’s IPO was highly sought-after. The initial $30 per share was at the top end of the projected $28 to $30 range, and demand outstripped supply by more than 23 times, according to insider sources.
Instacart’s rocky start has not dampened the overall enthusiasm for large US listings, as it remains one of the most sizable companies to go public in nearly two years. It joins Arm in rekindling hopes for a resurgence in US IPOs.
Featured Image – Freepik
Author Kristen Moran 
