Instacart Stock Rises on Earnings Beat, Upgrade. Why Fierce Competition Is Helping.

Benchmark Equity Research upgraded Instacart to Buy from Hold. (Michael Loccisano/Getty Images)

Shares of Maplebear, the grocery-delivery company that does business as Instacart, were rising sharply Friday after beating quarterly earnings and sales expectations.

Instacart reported earnings of 41 cents a share for the second quarter, surpassing Wall Street’s call for 38 cents, according to FactSet. Gross transaction value (GTV)—a measure of all products sold through Instacart—totaled $9.1 billion, above analysts’ consensus estimate of $8.9 billion and up 11% from a year ago.

Maplebear stock was rising 5.4% to $52.03 in midday trading Friday. Shares have climbed 26% this year.

Following the earnings print, Benchmark analyst Mark Zgutowicz upgraded Instacart to Buy from Hold and initiated a $67 price target in a research note Friday. Instacart isn’t sustaining its share of the grocery-delivery category it helped pioneer, Zgutowicz argued, but its growth trajectory has become too strong to ignore.

Competition from major grocery players like Amazon Fresh and Walmart may be helping the company.

U.S. digital grocery sales totaled $9.8 billion in June, up 28% year-over-year, according to Mercatus, an online-grocery software vendor. As the overall category expands, small and regional grocers have to find ways to compete with huge, digitally savvy competitors, Zgutowicz said. That’s where Instacart comes in.

“Despite our belief CART is not sustaining category share, its 2Q results and outlook, including GTV growth inflection, suggest it may not matter as the company rides a secular tailwind gaining momentum each quarter,” Zgutowicz wrote.

Benchmark lowered its forecasts for Instacart’s third-quarter gross margin, take rate, and adjusted earnings before interest, taxes, depreciation, and amortization. But, given Instacart’s stable growth history, Benchmark lifted estimates for GTV, order volume, average order value, and revenue for this quarter.

Write to Nate Wolf at nate.wolf@barrons.com