Instacart Stock Jumps on More Buyback News. Why Investors Are Bullish.

Barron's

Jun 04, 2024

DJ Instacart Stock Jumps on More Buyback News. Why Investors Are Bullish. -- Barrons.com
Thursday, June 06, 2024 01:33:30 PM ET
 

By Evie Liu

Shares of Instacart parent Maplebear jumped 9% on Thursday as investors cheered on news of more buybacks from the grocery delivery firm.

Instacart's board approved another $500 million new share repurchase program on June 2, according to a regulatory filing on Thursday.

Buybacks are usually a sign of management's optimism in the company's growth potential and stock returns, or its attempt to boost investor confidence.

"Our business is performing well and we remain focused on deepening our lead as the largest online grocery marketplace," said CFO Emily Reuter in a statement.

The company said it had already completed two rounds of authorized buybacks of $1 billion, or about 34 million shares outstanding.

That means the average buyback price stood at $29.41 a share. As of Thursday midday, the stock is trading around $33.68, about 15% higher than that average buyback price.

By the end of the latest quarter, Instacart had about $1.7 billion of cash and equivalents on its balance sheet, more than enough to cover the newly authorized repurchase of $500 million.

The new buybacks would further shrink the company's floating shares and boost its stock price. As of Wednesday's close, the grocery-delivery firm had about 265 million shares outstanding and a market value of $8.2 billion.

Instacart has posted steady earnings of 43 cents and 44 cents a share, respectively, in the past two quarters, while Wall Street had expected it to report losses. Still, as of Wednesday's close, the shares are down nearly 20% since the latest earnings report in May.

After it debuted as a publicly traded stock last September at $30, Instacart shares fell well below the IPO price for months before rebounding since February on the back of a broader market rally. The stock peaked at $39.19 on April 5, but has since come down to $30.95 as of Wednesday's close.

Wall Street analysts have been raising their outlook for the company's financial performance in the coming years. That means the stock is likely undervalued, said Gordon Haskett analyst Robert Mollins in a Wednesday note. "We believe now is an opportune entry point to buy the shares," he wrote.

Mollins upgraded Instacart shares to Buy from Hold on Wednesday and raised the price target to $45 from $37. Among the 27 analysts polled by FactSet, 15 have a rating of Buy or equivalent for the stock, with an average target price of $43, indicating a 30% upside from the current level.

Write to Evie Liu at evie.liu@barrons.com

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