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Late on Tuesday, Needham analyst Bernie McTernan initiated coverage of Maplebear with a Hold rating but did not specify a price target. McTernan’s analysis suggests that the risks and potential benefits related to Maplebear’s stock are evenly balanced due to an anticipated slowdown in growth following a surge in demand during the pandemic.
McTernan highlighted that online grocery sales in the U.S. experienced an annual growth rate of approximately 60% from 2019 to 2022. However, he anticipates this figure will drop to around 12% per year until 2025 due to structural obstacles hindering the adoption of online grocery shopping.
According to a consumer survey conducted by Needham, 38% of respondents do not plan to use an online grocery marketplace within the next month. The main reasons given for this reluctance include concerns about product accuracy, enjoyment derived from physical grocery shopping, and higher costs associated with online purchasing.
McTernan also noted that Maplebear’s advertising business has reached maturity and is likely to experience more moderate growth moving forward. Despite expecting Maplebear’s ad revenue growth to surpass that of the broader U.S. digital ad industry and grow faster than transaction revenue, he believes it has now entered a slower growth phase.
Furthermore, McTernan pointed out increasing competition in the market as companies like Uber Technologies (NYSE:UBER), DoorDash, Amazon.com (NASDAQ:AMZN), and Walmart (NYSE:WMT) invest in their own grocery platforms. He expressed concerns that this growing competition, coupled with the slowing growth of the market, could negatively affect Maplebear’s estimates. He concluded that, compared to other high-margin but slower-growing tech companies, Maplebear’s stock appears to be fairly valued.
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