Instacart shares drop as fourth-quarter outlook falls short

Investing.com - Shares in Instacart (NASDAQ:CART) fell in premarket trading on Wednesday after the grocery delivery platform unveiled fourth-quarter gross transaction value (GTV) and core profit guidance that missed estimates.

Intensifying competition from online delivery rivals like DoorDash (NASDAQ:DASH) and UberEats has heaped pressure on Instacart, which is already facing a moderation in consumer spending following a pandemic-era boom in demand.

Households have also reined in expenditures on more expensive services like dining out as they grapple with budgetary strains from increased prices.

For the fourth quarter, Instacart expects GTV -- a key growth metric that measures the total value of transactions on the platform -- to come in between $8.5 billion and $8.65 billion, disappointing Wall Street projections of $10.20 billion, according to LSEG data cited by Reuters.

Adjusted earnings before interest, taxes, depreciation and amortization for the period, which includes the key holiday shopping season, were also seen at $230 million to $240 million, below expectations.

"[T]his guidance reflects positive seasonality in advertising and other revenue, partially offset by our reinvestments in more affordable service options as well as marketing incentives to further drive online grocery adoption," finance chief Emily Reuter told analysts in a post-earnings call.

The outlook stood in contrast to DoorDash, which recently unveiled a stronger-than-anticipated fourth-quarter core profit outlook.

Still, in the third quarter, Instacart posted adjusted earnings per share of $0.42, surpassing consensus estimates of $0.22. Revenue for the quarter rose 12% versus a year ago to $852 million, topping the $843.6 million anticipated by analysts.

GTV expanded by 11% to $8.3 billion, driven by a 10% uptick in orders to 72.9 million. The company's adjusted core income also climbed by 39% to $227 million, representing 27% of total revenue.

Writing in a note to clients, analysts at Jefferies said while the third-quarter GTV growth was "impressive," they came away from the call with executives "without visibility" into either the sustainability of the increase and "a pathway for higher advertising penetration." They noted both of these issues were "key tenets" of the stock's performance.

Instacart's share price has now risen by more than 61% since the stock made its Nasdaq debut in September 2023.

(Senad Karaahmetovic and Reuters contributed reporting.)

This article first appeared in Investing.com