Instacart’s IPO: A Calculated Risk or a Golden Opportunity?

Justin Hopper September 15, 2023Last Updated: September 18, 2023

2 minutes read

Last Updated: 18.9.2023 16:16

Instacart Raises IPO Price Amid Market Volatility

Instacart, a leading grocery delivery startup, recently announced an increase in its initial public offering (IPO) share price range from $26-$28 to $28-$30. This move comes on the heels of British chip designer Arm’s successful IPO, which saw its stock surge +25% on its first trading day. The timing and the price hike have left investors pondering whether Instacart’s IPO is a calculated risk or a golden opportunity.

Valuation Dynamics: A Closer Look

The new price range gives Instacart an implied valuation between $9.3 billion and $9.9 billion. While this is a significant increase from its earlier range of $7.7 billion to $9.3 billion, it’s worth noting that the company’s valuation has seen a massive drop from its $39 billion pre-money valuation in March 2021. Market conditions and changing consumer preferences, particularly the easing of the Covid-19 pandemic, have impacted the food delivery sector at large.

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Diversification as a Growth Strategy

Instacart is not just a grocery delivery service; it also has an advertising and software sales unit that it touts as a source of growth. This diversification could be a key factor for investors to consider, as it offers a hedge against the volatile food delivery market.

Analysts Weigh In

Bernstein analyst Nikhil Devnani has set a $28 to $32 fair-value share price range for Instacart, aligning closely with the company’s current range. According to Devnani, despite a slowdown in order growth and total transaction value, Instacart comes to the market with profitability and a chance to prove its growth story.

What’s Next for the IPO Market?

The success of Arm and the upcoming Instacart IPO could potentially inspire other companies to consider going public. With the IPO market showing signs of revival, companies like Klaviyo, Birkenstock, and Databricks are also eyeing the New York trading floor. What are your thoughts? Tweet us and we’ll retweet you on @wealthyvc