How to Buy Instacart Stock: Will it Deliver?

Instacart is a fast-growing company, thanks in part to the coronavirus pandemic. According to data from Instacart, millions of people signed up for grocery delivery in the wake of stay-at-home orders and concerns about in-person shopping. In fact, 48% of adults say they ordered groceries online during the pandemic, according to a Harris poll conducted on behalf of Instacart.

As a result of this growth, there has been interest in how to buy Instacart stock. It’s not possible to buy Instacart stock right now, but the company is expected to make its initial public offering (IPO) sometime in 2022, and Instacart announced in May 2022 that it had confidentially submitted a draft registration statement with the Securities and Exchange Commission. Here’s what you need to know ahead of an Instacart stock IPO.

Instacart details

Instacart was founded in 2012 as an online grocery delivery company headquartered in San Francisco. The main idea behind the service was for consumers to make a grocery order and have someone else shop the items and deliver them, often with same-day delivery. Customers pay a service fee and a delivery fee, and also have the option to tip their shoppers. Instacart is considered part of the gig economy, which uses independent contractors, also known as gig workers, to complete the shopping.

There are three co-founders: Brandon Leonardo, Apoorva Mehta, and Max Mullen. Mehta was an engineer at Amazon before founding Instacart.

The company is currently private and for-profit, but an Instacart stock IPO is potentially in the works for early next year. Recently, Mehta was transitioned out of the CEO position and the company hired Fidji Simo, who was head of the Facebook app.

Why do people want to invest in Instacart?

As one of the early grocery delivery apps, Instacart has an advantage due to market placement. However, Instacart also offers other reasons to invest if you’re interested in doing so.

Instacart is seen as a company that offers value to the economy. For example, NERA Economic Consulting recently released a study commissioned by Instacart that indicates Instacart represented 70% of net grocery job creation between 2013 and 2019 while increasing grocers’ revenues by billions of dollars.

Another reason some people might be interested in how to buy Instacart stock is due to the interesting partnerships involved. Not only does Instacart work with more than 500 retailers around the country, but the company recently announced a new partnership with Kroger.

This partnership is a “digital convenience store” and is designed to allow customers to receive their orders within 30 minutes. It’s already common for customers to get their orders in one or two hours, so this new partnership has the potential to provide even more interest for the future.

Finally, Instacart continues to make improvements to the app offering affordability features, such as a deals tab, providing access to free and reduced-cost delivery, and a hub for dollar stores. It’s also introduced grocery store pick-up for customers who don’t want to pay delivery fees. All of these innovations potentially point to Instacart as a sustainable business.

Another reason for interest in an Instacart stock IPO is the potential valuation, or value of the company. Instacart recently raised $200 million, and the valuation listed at that time was $17.7 billion. However, there’s speculation that an IPO could push that valuation to $30 billion. The latest fundraising round brought Instacart’s total fundraising to $2.9 billion in 18 rounds, with 36 investors providing funds.

Some of the notable investors include Andreessen Horowitz, Sequoia Capital Management, and Fidelity Management and Research Company. Additionally, Instacart has made its own acquisitions, including Caper, a company that focuses on smart cart artificial intelligence technology. Instacart’s IPO is being managed by long-standing financial powerhouse Goldman Sachs.

Reasons to invest in Instacart

Instacart is well-known in the grocery delivery space. As a result, it is often the default when people are looking for a service that can perform shopping and delivery functions. The fact that the company recently acquired Caper indicates that Instacart continues to invest in technologies designed to improve the shopping experience and boost customer engagement.

On top of that, if Instacart can continue to establish partnerships for the “digital convenience store” concept that allows people to get their orders even faster, that could potentially provide another way to efficiently earn money.

Pros of buying Instacart stock

Instacart still has a lot of potential even though it’s already seen a lot of growth. The pandemic encouraged many people to begin shopping from home, and it could be a long-term habit for many people.

Even when concerns about the pandemic fade, some customers might continue to use the app because of its convenience. Being able to buy Instacart as an IPO stock could potentially give you the chance to buy at a lower share price and then see gains later if Instacart sees continued usage and revenue growth.

To sum up the pros of buying Instacart stock:

• Potential to buy IPO shares while they are relatively inexpensive
• Benefit from the shift many consumers have made to grocery delivery
• Plans for more features and its investment in artificial intelligence could give it an additional edge

Cons of buying Instacart stock

As with any asset, there’s a chance that you could lose your money when you invest in Instacart stock. Additionally, even though there is talk of a high valuation when Instacart launches its IPO, those hopes could be dashed. Instacart cut its valuation in March 2022 to $24 billion from the $39 billion from its last funding round.

In some cases, an IPO drops after its first day, so you might see the value of your stock drop. Finally, if the market changes or if there is some other disruption, Instacart might not fulfill what’s currently seen as its potential.

For example, Instacart faces challenges regarding its shoppers, who are classified as independent contractors. California passed Assembly Bill 5 which required many independent contractors, including Instacart shoppers, to be classified as employees. Instacart joined with other companies like Uber and Lyft to help pass California Proposition 22, which overrode AB 5. These efforts are expensive, potentially lowering profits, and other states may pass bills similar to AB 5, which could eat up even more of Instacart’s profits.

To sum up the cons of buying Instacart stock:

• Disruptions in the market could reduce the viability of Instacart in the future
• The post-IPO stock price could drop
• There’s always the potential of loss
• Potential labor issues and other challenges may keep it from paying off

When to expect an Instacart IPO

An exact date for the Instacart stock IPO hasn’t been set. However, there is some speculation that it could take place in 2022. Instacart said in May 2022 that it had confidentially filed to go public. Additionally, there’s no real information on what the potential price for the shares will be at the IPO. So far, there is mainly speculation that the IPO could improve Instacart’s valuation to $30 billion. There are some rumors about a potential ticker, with some of the frontrunners being ICART or INST.

How to buy Instacart stock

Right now, it’s not possible to purchase Instacart stock on the open stock market because it hasn’t gone public yet. You can learn how to choose a brokerage and open an account ahead of time so you’re prepared.

However, even though you can’t buy Instacart stock, you might be able to tangentially benefit by investing in a company that invests in Instacart. For example, T. Rowe Price (TROW) is an investor, so if the IPO is a success, it could help that company.

Rather than focusing on Instacart, you could also look into similar companies. DoorDash (DASH) completed its IPO in 2020. Although many people think of DoorDash primarily as a food delivery app that focuses on restaurants, the company has been expanding into grocery delivery and could provide a current alternative.

Another possibility is Target stock (TGT). The Target Corporation owns Shipt, another same-day delivery service that’s similar to Instacart. If you’re not sure about a new company’s stock, deciding on a retailer that’s been around for a while could be a viable alternative. Walmart (WMT) also has its own grocery delivery service and is sold on the New York Stock Exchange (NYSE).

To take advantage of these opportunities, you’ll need an investment account. Check out our lists of the best investment apps and best brokerage accounts to get an idea of how to start investing, even if you have a small amount of money.

Finally, if you want to invest pre-IPO, you might be able to find Instacart shares on trading platforms such as EquityZen and Forge.

Additionally, some well-known investment apps like Robinhood allow you to get in early on the action on IPO day. SoFi Invest® also offers a way to access IPOs before they start trading publicly. Learn more in our Robinhood and SoFi Invest reviews.

Be careful, though. As with any stock purchase, it’s important to do your due diligence. If you purchase a stock pre-IPO, there’s a chance it will be a dud on opening. There’s a bit more risk in buying pre-IPO stocks.

FAQs

Bottom line

Although you can't invest in Instacart stock right, it’s possible to prepare ahead of time. Consider researching the company and looking at the market for grocery delivery services. You can also learn how to invest in Instacart stock pre-IPO by checking into platforms that offer shares of companies before they go public.

In the meantime, you can also learn how to invest money and get a feel for how it works. That way, you’ll be better equipped to make the right decision for your portfolio when Instacart IPO stock shares become available.

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