AI And Retail Media Will Drive Massive Long Term Upside In Grocery Fulfillment

Catalysts

About Maplebear

Maplebear, doing business as Instacart, provides technology driven grocery and retail fulfillment, advertising and enterprise software solutions across North America.

What are the underlying business or industry changes driving this perspective?

• Scaling leadership in large basket online grocery, where 75% of the market still resides, positions Maplebear to capture disproportionate share as digital penetration of weekly grocery trips rises. This supports durable double digit GTV and transaction revenue growth.
• Rapid expansion of the enterprise platform, now powering more than 350 retailer storefronts with increasing cross sell of fulfillment, Caper Carts and FoodStorm, embeds Maplebear deeply in retailer operations and should drive high margin recurring software and services revenue over time.
• Emerging AI and agentic shopping tools for consumers and retailers, built on over 1.5 billion historical orders and a 17 million item catalog, can materially improve personalization, fulfillment efficiency and in store intelligence. This can expand revenue while structurally lowering unit costs and enhancing net margins.
• Accelerating retail media adoption as brands shift budgets to high return, closed loop channels, combined with Carrot Ads, Caper Cart media and off platform partnerships with Google, Meta, TikTok and others, supports a path to advertising and other revenue reaching 4 to 5 percent of GTV and driving outsized earnings growth.
• International rollout of proven enterprise products like Storefront Pro, Caper and FoodStorm into underpenetrated grocery markets extends the addressable base without marketplace level fixed costs. This creates a long runway of capital efficient incremental revenue and EBITDA contribution.

Assumptions

This narrative explores a more optimistic perspective on Maplebear compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Maplebear's revenue will grow by 11.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 13.9% today to 20.2% in 3 years time.
• The bullish analysts expect earnings to reach $1.0 billion (and earnings per share of $3.59) by about December 2028, up from $505.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $494.9 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 20.6x on those 2028 earnings, down from 23.4x today. This future PE is lower than the current PE for the US Consumer Retailing industry at 22.7x.
• The bullish analysts expect the number of shares outstanding to decline by 0.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Affordability remains the number one reason for customer churn and a barrier to first time orders, and sustained consumer price sensitivity combined with retailer reluctance to move to full price parity could cap order growth and require ongoing incentives that pressure revenue growth and net margins over time.
• Advertising and other revenue is already seeing slower growth as large brand partners moderate spend in response to macro uncertainty and shifting consumer trends, and if this persists despite new formats and partnerships, the company may fall short of its long term goal of advertising contributing 4 to 5 percent of GTV, limiting earnings and profit expansion.
• International expansion and new AI and enterprise products are being pursued while the core North American marketplace is still in a relatively early penetration phase, and if these initiatives require higher than expected investment or slower adoption from retailers, they could dilute returns on capital and weigh on EBITDA and net income.
• Regulatory and labor changes such as the New York City minimum earnings standard for delivery workers, along with potential future rules in other jurisdictions, could structurally raise fulfillment costs and force higher fees or reduced availability, which would undermine affordability efforts and compress unit economics and operating margins.
• Competitive intensity from large players like Amazon and other digital grocery and restaurant platforms, particularly around small basket and price sensitive use cases, may erode Instacart's share gains and weaken the effectiveness of its enterprise exclusivity strategy, ultimately slowing GTV growth and limiting the scale benefits needed to expand earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Maplebear is $66.0, which represents up to two standard deviations above the consensus price target of $50.62. This valuation is based on what can be assumed as the expectations of Maplebear's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $66.0, and the most bearish reporting a price target of just $36.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $5.0 billion, earnings will come to $1.0 billion, and it would be trading on a PE ratio of 20.6x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $44.96, the analyst price target of $66.0 is 31.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.