Founded in 2012, Instacart (CART) (officially known as Maplebear) has risen to prominence in the retail industry in a short period of time. The company provides a food delivery and pick-up service that enables customers to order groceries and other household necessities online from their preferred local stores.

Instacart was the most talked-about IPO of 2023, but CART stock fell 30% last year, compared to the S&P 500 Index’s ($SPX) return of 25%. However, thanks to its robust fourth-quarter results, CART stock has skyrocketed 41% so far in 2024.

According to the Street-high target price estimate, analysts see potential upside of nearly 45% in the next 12 months. Let’s dig into CART's quarterly results to determine if this growth stock is a good buy now.

Behind the Big Growth at Instacart

The global pandemic emphasized the importance of online shopping and delivery. However, the online shopping market didn’t stop growing in the post-pandemic world, even as stores reopened. People still prefer the convenience of online shopping. Companies like Instacart save customers the time and energy spent in daily hassles such as navigating aisles, searching for products, standing in long checkout lines, and so on. 

What's impressive is that Instacart didn't limit its operations to just grocery shopping and delivery. The company has displayed a knack for adaptability in response to changing market demands. Over recent years, it has collaborated with a variety of supermarkets, specialty stores, pharmacies, and even pet supply stores to expand its user base and provide customers with any products they require at their convenience.

Furthermore, the company launched subscription-based models called Instacart+ (previously referred to as Instacart Express) that provide free delivery and reduced service fees for a monthly or annual fee. This strategy promotes customer loyalty and generates a reliable revenue stream for the company.

In the fourth quarter, gross transaction value (GTV) rose 7% year-on-year, resulting in a 6% increase in total revenue to $803 million. GTV refers to the "value of the products sold based on prices shown" on Instacart's platform.

Advertising and other revenue increased by 7% year-on-year to $243 million. In addition, the company reported a profit of $135 million under GAAP (generally accepted accounting principles). 

Innovative Strategies Drive Growth at Instacart

Instacart continues to relentlessly innovate. The company intends to build the best advertising platform possible, ultimately increasing its advertising revenue. In the Q4 shareholder letter, management said, “By partnering with Google, The Trade Desk, Roku, and more, we’re helping brands create more performant and targeted campaigns across channels like search, social, programmatic, CTV, and linear TV.”

Furthermore, in collaboration with Peacock, the company has developed its first streaming platform for Instacart+ members at no additional cost. Members will have access to more than 80,000 hours of content, as well as free delivery and other benefits.

Looking ahead to Q1, management anticipates adjusted EBITDA in the $150 million to $160 million range. Additionally, GTV growth could increase by 7% to 10% in Q1. For the full year 2024, analysts predict Instacart’s revenue will increase by 7.9% year-over-year to $3.28 billion, with earnings per share landing at $0.53. 

Revenue and earnings are expected to increase by 8.2% and 103.7% respectively, in 2025. Instacart stock trades at two times forward projected sales, which appears reasonable for a growth stock.

Is CART Stock a Buy, According to Analysts?

Overall, Wall Street rates CART stock as a “moderate buy.” Out of the 17 analysts that cover the stock, nine rate it a “strong buy,” and eight rate it a “hold.” The average target price of $34.56 implies minimal upside from current levels; however, the Street-high target of $48 suggests a stock price increase of 44.7% from current levels.

The Key Takeaway on CART Stock

Instacart’s expansion - boasting partnerships under more than 1,500 banners, and with 85,000 stores in 14,000 cities, in a short span of time - is impressive. Furthermore, the company's ongoing innovative efforts to make its platform more accessible to consumers are paving the way for a bright future.

As the online shopping market expands, I believe Instacart is poised for significant growth as it evolves and adapts to new challenges. At a reasonable valuation, this growth stock is a good long-term investment right now.

However, keep in mind that the company is still growing, so it is also a risky investment. As such, it would be prudent to begin with a small stake in Instacart alongside a diverse portfolio of stable stocks.