Instacart Stock Spikes as Analyst Suggests an Uber Technologies Takeover

Mathivanan writes in a research note that the stock looks attractive at current levels, and that there are several paths for better performance of the shares, “including a potential merger with Uber.”

Instacart declined to comment on the Wolfe Research report. Uber didn’t immediately respond to a request for comment.

Instacart shares have been under pressure since the company joined the public market, largely on concerns about its growth outlook—reservations that Mathivanan admits he shares. However, Instacart isn’t a broken business, he says, even though the company’s very low valuation implies that it is. The stock trades at about six times forward Ebitda, or earnings before interest, taxes, depreciation, and amortization.

The analyst highlights three main reasons Uber might want to buy Instacart. For one, it would accelerate Uber’s push into the $1 trillion grocery segment. He also sees potentially significant revenue and cost synergies. Lastly, he sees little regulatory risk, given that Uber has less than 1% of the market for grocery delivery.

“While Uber’s fundamentals are solid medium-term, grocery is a key category to sustain growth long-term and competition is making rapid progress,” he writes. “Second, Uber has a favorable cash position and valuation levels that could make the transaction accretive.”

He points out that The Wall Street Journal has reported that in 2021 Instacart had approached both
DoorDash
and Uber about potentially buying the company.

Mathivanan asserts that Uber could pay as much as $40 a share for Instacart and still find a transaction accretive.

Write to Eric J. Savitz at [email protected]