Shares of the leading grocery delivery company Instacart (NASDAQ:CART) closed 7.5% higher on Wednesday, propelled by speculation from Wolfe Research analyst Deepak Mathivanan. He thinks that ride-hailing and delivery giant Uber (NYSE:UBER) may buy CART at $40/share, representing a 56% premium from the current market price. The five-star analyst upgraded CART stock to Buy from Hold with a price target of $35.
The analyst finds CART’s risk/reward compelling and sees multiple growth catalysts, including the prospect of a merger with Uber. Mathivanan believes that Uber could consider this merger to dominate the large grocery market.
Instacart: A Solid Acquisition Target for Uber
Instacart stock closed at $25.67 on Wednesday, which is still below its IPO price of $30. While macro headwinds took a toll on Instacart stock, it maintains a strong competitive position in the online grocery delivery industry.
The company has partnered with 1,400 national and local retail banners and is adding more customers. Further, it has grown its gross transaction value (GTV) faster than the online grocery market. The company also owns a growing ad solutions business.
All these attributes make Instacart a solid acquisition target for Uber, which is focusing on driving and retaining its customers in both the mobility and delivery businesses.
Is Instacart a Good Stock to Buy?
As the macro headwinds and absence of government aid continue to hurt the online grocery industry, analysts remain cautiously optimistic about Instacart stock. It has eight Buy and five Hold recommendations for a Moderate Buy consensus rating. Analysts’ average price target of $33.36 implies 29.96% upside potential from current levels.
