Market Capitalization: $9.4B
Enterprise Value: $7.4B
Price: $35.23 (4/20/24)

What the Company Does

Maplebear, which conducts business as Instacart, is the leading technology facilitating grocery shopping and delivery in North America. The company partners with over 1,500 grocers, including 24 of the top 25 here, covering over 97% of households. Instacart’s platform allows uses to shop at any partner grocer while offering customization options for delivery (same-day, next-day, priority, no rush, and pickup) and product features, with eventual fulfillment completed by one of the company’s 600K available “shoppers.” The company generates revenue via transaction fees on these online grocery orders and advertisements/promotions for various consumer packaged good brands sold at its retail partners’ stores.

Why We Own It

CART offers compelling growth prospects at a good valuation with an aligned management team. Only ~12% of the $1.1T North America grocery market occurs online.1 While growth in CART’s aggregate order volume has moderated recently after rapid growth during the pandemic, management is guiding for 1Q24 Gross Transaction Value (GTV) growth of 8.5% year-over-year (Y/Y) at the midpoint, representing the company’s fourth consecutive quarter of GTV growth acceleration. In 2023, CART continued expanding its market share of large-basket ($75+ order value) and small-basket ($75 or less order value) digital orders to more than 70% and 50% in 2023, respectively. Instacart’s focus on larger and recurring orders (average order value (AOV) of ~$113 in 2023) is a key source of differentiation from peers who focus more on “convenience” orders, as CART is able to generate higher gross profit per order while allocating its fixed costs over a larger order base; weekly shops also provide a regular captive audience for its higher-margin ad business.

Moreover, CART’s customer base has demonstrated strong brand loyalty, with management noting that on average, customers nearly double their order frequency and spend per month between years 1 and 6 on the app. Despite CART’s superior unit economics, shares trade at a single-digit EV/EBITDA multiple on current year earnings, ~60% discount to gig-economy peers like UBER and DASH. The company’s asset-light business model lends itself to lower capex requirements, which should allow for free cash flow to scale substantially as the company gains operating leverage and expands margins going forward, with shares offering a FCF/EV yield of 7.3% today.

How Management Allocates Capital

Management’s top priority is to invest excess cash into R&D and marketing to fuel organic growth. However, with a pristine balance sheet and a net cash position of ~$2.1B, management has stressed that it has significant financial flexibility to opportunistically tap into its $930mm of remaining share buyback authorization (almost 10% of market cap), while also meeting its required reinvestments into the business. Top holder Sequoia recently added to its position by purchasing over 2.2 million shares in the high-20s, bringing their total position to 54.3mm shares.