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Instacart Pops 12% On Nasdaq Debut: 6 ETFs in Focus
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Grocery delivery company Instacart's shares (CART) made their Nasdaq debut on Tuesday, with a 12% increase in their stock price. However, this gain was short-lived in nature, as the stock failed to maintain its intraday high of 43%. This debut came shortly after SoftBank's Arm Holdings made a successful debut on Wall Street.
IPO Details
The San Francisco-based Instacart, legally known as Maplebear Inc, priced its initial public offering (IPO - Free Report) at the upper end of its $28 to $30 price range, raising a total of $660 million. Of this amount, $237 million will go to investors who sold their shares in the offering. This IPO valued Instacart at nearly $9.9 billion, significantly less than its $39 billion valuation in its 2021 funding round.
Instacart's Journey to IPO
Instacart's IPO comes nearly three years after the company began preparations for going public. The company achieved profitability in its core business in 2022, and this trend has continued into the first half of 2023. In 2021, co-founder Apoorva Mehta stepped down after seven years, naming Fidji Simo, the former head of Meta's (META - Free Report) Facebook app, as CEO.
Should You Invest in Instacart?
Instacart delivers groceries from chains including Kroger, Costco and Wegmans. Instacart has forgone growth for profitability, a move needed to preserve cash and attract investor interest.
Revenue increased 15% in the second quarter to $716 million, down from growth of 40% in the year-earlier period and about 600% in the early months of the pandemic. The company lowered headcount in mid-2022 and cut costs associated with customer and shopper support, per a CNBC article.
Another food delivery service provider – DoorDashDASHDASH – has seen its shares surging 63.8% this year. Hence, we expect Instacart shares to taste success. At $11.2 billion, Instacart is valued at about 3.9 times annual revenues whereas DoorDash – apparently a competitor to Instacart, trades at 4.1 times revenues. Uber UBER,whose Uber Eats business is similar in nature to Instacart, trades for less than three times its revenues. In a nutshell, Instacart is currently trading at a justified valuation, rather at a cheaper valuation than DoorDash.
ETFs in Focus
The market debut of Instacart could pave its entry into a number of ETFs in the coming days. Investing in IPO ETFs could be a compelling way to enter the IPO business without directly investing in individual companies. IPO ETFs are funds that invest in a basket of companies that have recently gone public, providing diversified exposure to the IPO market.
Plus, the stock may be included in several sector ETFs that align with the space Instacart operates in. Notably, Instacart joined the ranks of gig economy companies like Uber, Airbnb, Lyft, and DoorDash in the public market.
Below we highlight few such ETFs that should be tracked in light of Instacart likely IPO.
The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that meet liquidity & operational screens are included in the Index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% & removed after two years. The fund charges 60 bps in fees.
First Trust US Equity Opportunities ETF (FPX - Free Report)
The underlying IPOX-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX Composite U.S. Index. The IPOX Composite U.S. Index is a rules-based value-weighted index measuring the average performance of U.S. IPOs during their first 1,000 trading days. The fund charges 60 bps in fees.
The underlying FactSet On-Demand Index consists of companies which provide on-demand platforms and services to consumers. The fund charges 58 bps in fees.
This ETF is active and does not track a benchmark. The Franklin Disruptive Commerce ETF seeks capital appreciation by investing in innovative companies benefitting from transformation in the e-commerce space. The fund charges 50 bps in fees.
iShares Virtual Work and Life Multisector ETF
The underlying NYSE FactSet Global Virtual Work and Life Index measures the performance of equity securities across multiple sectors, including Information Technology, Communication Services, Consumer Discretionary, Health Care, and Consumer Staples. The fund charges 47 bps in fees.
The underlying EQM Online Retail Index utilizes a rules-based methodology to select a globally diverse group of companies with 70% or more of revenue from online and virtual sales. The fund charges 65 bps in fees.
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Instacart Pops 12% On Nasdaq Debut: 6 ETFs in Focus
Grocery delivery company Instacart's shares (CART) made their Nasdaq debut on Tuesday, with a 12% increase in their stock price. However, this gain was short-lived in nature, as the stock failed to maintain its intraday high of 43%. This debut came shortly after SoftBank's Arm Holdings made a successful debut on Wall Street.
IPO Details
The San Francisco-based Instacart, legally known as Maplebear Inc, priced its initial public offering (IPO - Free Report) at the upper end of its $28 to $30 price range, raising a total of $660 million. Of this amount, $237 million will go to investors who sold their shares in the offering. This IPO valued Instacart at nearly $9.9 billion, significantly less than its $39 billion valuation in its 2021 funding round.
Instacart's Journey to IPO
Instacart's IPO comes nearly three years after the company began preparations for going public. The company achieved profitability in its core business in 2022, and this trend has continued into the first half of 2023. In 2021, co-founder Apoorva Mehta stepped down after seven years, naming Fidji Simo, the former head of Meta's (META - Free Report) Facebook app, as CEO.
Should You Invest in Instacart?
Instacart delivers groceries from chains including Kroger, Costco and Wegmans. Instacart has forgone growth for profitability, a move needed to preserve cash and attract investor interest.
Revenue increased 15% in the second quarter to $716 million, down from growth of 40% in the year-earlier period and about 600% in the early months of the pandemic. The company lowered headcount in mid-2022 and cut costs associated with customer and shopper support, per a CNBC article.
Another food delivery service provider – DoorDash DASHDASH – has seen its shares surging 63.8% this year. Hence, we expect Instacart shares to taste success. At $11.2 billion, Instacart is valued at about 3.9 times annual revenues whereas DoorDash – apparently a competitor to Instacart, trades at 4.1 times revenues. Uber UBER,whose Uber Eats business is similar in nature to Instacart, trades for less than three times its revenues. In a nutshell, Instacart is currently trading at a justified valuation, rather at a cheaper valuation than DoorDash.
ETFs in Focus
The market debut of Instacart could pave its entry into a number of ETFs in the coming days. Investing in IPO ETFs could be a compelling way to enter the IPO business without directly investing in individual companies. IPO ETFs are funds that invest in a basket of companies that have recently gone public, providing diversified exposure to the IPO market.
Plus, the stock may be included in several sector ETFs that align with the space Instacart operates in. Notably, Instacart joined the ranks of gig economy companies like Uber, Airbnb, Lyft, and DoorDash in the public market.
Below we highlight few such ETFs that should be tracked in light of Instacart likely IPO.
Renaissance IPO ETF (IPO - Free Report)
The underlying Renaissance IPO Index is a portfolio of newly U.S.-listed initial public offerings of companies whose unseasoned equities are under-represented in core U.S. equity indices. IPOs that meet liquidity & operational screens are included in the Index at the end of the fifth day of trading, or upon quarterly reviews, weighted by tradable float, capped at 10% & removed after two years. The fund charges 60 bps in fees.
First Trust US Equity Opportunities ETF (FPX - Free Report)
The underlying IPOX-100 U.S. Index is a modified value-weighted price index measuring the performance of the top 100 companies ranked quarterly by market capitalization in the IPOX Composite U.S. Index. The IPOX Composite U.S. Index is a rules-based value-weighted index measuring the average performance of U.S. IPOs during their first 1,000 trading days. The fund charges 60 bps in fees.
ProShares On-Demand ETF (OND - Free Report)
The underlying FactSet On-Demand Index consists of companies which provide on-demand platforms and services to consumers. The fund charges 58 bps in fees.
Franklin Disruptive Commerce ETF (BUYZ - Free Report)
This ETF is active and does not track a benchmark. The Franklin Disruptive Commerce ETF seeks capital appreciation by investing in innovative companies benefitting from transformation in the e-commerce space. The fund charges 50 bps in fees.
iShares Virtual Work and Life Multisector ETF
The underlying NYSE FactSet Global Virtual Work and Life Index measures the performance of equity securities across multiple sectors, including Information Technology, Communication Services, Consumer Discretionary, Health Care, and Consumer Staples. The fund charges 47 bps in fees.
Amplify Online Retail ETF (IBUY - Free Report)
The underlying EQM Online Retail Index utilizes a rules-based methodology to select a globally diverse group of companies with 70% or more of revenue from online and virtual sales. The fund charges 65 bps in fees.