Putting the (Insta)cart before the (Grocery)horse: A COVID Favorite's Reality Check!

The COVID shutdown in 2020 created a host of pain, but it did also create some winners, and one of those was Instacart, an online grocery shopping and delivery company that was made for that moment. As Instacart usage soared, its pricing (by venture capitalists) also jumped, hitting $39 billion in a capital round in 2021. The bloom is off the rose, as online grocery sales have leveled off and Instacart is finally going public at a pricing of around $9-10 billion. I start by looking at the Instacart business model, with revenues coming from transaction service feeds and ads, and put it against the backdrop of the business that it serves, which is groceries. The grocery business is huge, but its combination of low growth and low margins, puts a ceiling on how quickly an intermediary in the business can grow and the profitability of that intermediary. I assume modest growth in transactions on Instacart, in line with overall growth in online grocery sales, with a declining take rate and improving profitability to estimate a value per share of about $29. While that put me right in the middle of the offering range, the stock started trading just as I was doing this session, and popped to $42. While I don't think it is an attractive investment at that price, who knows where it will be trading at a week from now? You are welcome to start with my valuation of Instacart and make it your own. Finally, I try to dispense with the notion that value investors are "smart money", by tracking VC investments over Instacart's life as a company, and chronicling that they trade companies, rather than invest in them.
Slides: pages.stern.nyu.edu/~adamodar...
Instacart Valuation: pages.stern.nyu.edu/~adamodar...
Blog Post: aswathdamodaran.blogspot.com/...

[@johnpaulchristen6911]

These are the most amazing finance videos I’ve ever seen. Thank you for sharing this information so freely.

[@paulmarz]

I love these videos. Ashwath lays out everything for both beginners and advanced investors

[@Beispielname1233]

seems like our professor catched the cold too. Wish you well from Germany :)

[@Thekingdomhearts.]

deutschland

[@ryry9780]

And at 18:10 Mr. Aswath has just validated the idea of deducting stock-based compensation from operating cash flow and including non-vested stock options/restricted shares in dilutive shares. Good thing I've been doing that for years.

[@chandrannatarajan6616]

Thank you Professor for another great analysis and teachings about the VCs. Stay blessed always.🙏

[@andaluz273]

Simple and straight to the point. Thank you.

[@zechmontera1748]

Very interesting. Living in Central FL I saw a Kroger delivery van in the fall of 2020. I looked into it and have been buying only online since. I have gone into a store maybe 10 times since.

[@HimanshuSachdevaHS]

I just love the process even if I dislike the story. Pls keep posting these.

[@krithikkumaran]

Thank you sir, started watching your videos recently, its amazing, very informative and realistic

[@surani1948]

Fantastic presentation. Love the way you logically break down all the numbers including those of competitors. Wish you were running investment club. Would definitely invest. Thank you for this thought provoking presentation. Looking forward to your next company analysis.

[@stamils]

Very good video Aswath 👍👍Thanks for taking the time to do this !!

[@nileshgada]

Lots to learn and polish about valuations in every session you upload sir ❤️❤️👍🏻👍🏻👌🏻👌🏻

[@jorgetejedor9884]

Despite the high quality of your videos, I can’t choose between the content itself or the tittle of the video, they are always spot on 😂

[@mcawesome4150]

26:05 ROFL 🤣🤣 I did not expect him to say that

[@tcareycares]

Thank you Professor Damodaran!

[@asishreddy7729]

Please do a valuation on Arm sir, it is really such a hyped up company and it would be very interesting to see how you approach it. Love your valuation lectures on TH-cam, they helped me so much in my investing life. 🙏🏼

[@mousquetaire86]

Would love to see one on Birkenstock!

[@thebargaininvestor22]

love your videos thank you

[@TimothyLee-mr5ev]

This has bothered me for a while now, Why wasn't dilution considered when calculating the return on IPO price? thanks so much in advance

[@kingamplify8904]

Amazing video, thank you for this

[@srinivasanlakshminarasimha9282]

Great presentation !!

[@kidgore99]

Honestly the best FinEd TH-cam channel out there…

[@pauljones9150]

🎉😊 thank you professor

[@user-sl9mc5rw9g]

Thank you, very insightful 🙏🏻

[@linexpocopoco640]

Thank you Profesor.

[@lucio9281]

great as always thank you so much

[@jgsfinancechannel4217]

Great analysis, thank you

[@vikyp989]

Would be great if you can analyse the prospects of the US retail sector which have been decimated in 2023.

[@RakanXYZ]

Hi Prof, in the Instacart valuation. In relation to the cost of capital for multibusiness (US) what is the risk free rate - 3.88 regarding? Is that the standard error?

[@tevsepromwebmaster8541]

¡Oh great!
I'm very antsy for review your imformation.
You're a one crack and inteligent.

[@sadagobans9269]

How did he get access to cohort level data?

[@mitchellrosenthal9029]

Hi Professor, I always enjoy watching you on CNBC and I thank you for sharing your knowledge. Is there a way I can communicate with you in private? I am raising money for a Real Estate Fund and I just can't get a good handle on proformas. I have a proposition that I think you would find very unique and would tie in with your students. Thank you very much and Happy Holidays to You and Your Family. Best Wishes & hope to hear from you.

[@jayliu645]

Advertising seems the bread and butter, little take rate and low margin, keep people using their platform. More people on platform means more value to advertisers, seems a playbook from amazon. From S1, the key for them is to provide value to customers by charge as little as possible and make high margin money from the advertising.

[@cashtube777]

You emphasized that you have never found smart money? So that would imply that all investors are better of in the index fund?

[@akramsystems]

You’re being too humble on VCs lool 😂

[@AH2andBeyond]

I absolutely love Aswath's "Realness"...LOL!!

[@PrathameshMone]

Could you please value India’s PayTm again?

[@user-pq1rc3wc2t]

26:00

[@anujbhandari1441]

Please revisit valuation of zomato as it turns profitable

[@user-ts7uf7cr8o]

7:31

[@LimoLife23]

Down to false rating to shoppers. False hope to shoppers...😂