Instacart's IPO gains dwindle within two days as rally fades

Instacart, the popular grocery delivery company, saw its shares decline more than 5% on its second day of trading. This continued a downward trend that began immediately after the stock debuted on the Nasdaq the previous day. The stock had initially surged 40% to $42 but closed at $33.70. By Wednesday, the rally had further fizzled, and shares were trading below $32.

Instacart's initial public offering (IPO) was highly anticipated and helped revive a sluggish IPO market that had been hampered by inflationary pressures and rising interest rates. However, the falling share price suggests that investors remain cautious about investing in technology companies that aim to disrupt traditional markets, despite the challenging economic landscape.

Instacart joins a group of gig economy companies that have gone public in recent years, including Airbnb, DoorDash, Uber, and Lyft. Of these, only Airbnb has proven to be a successful investment for shareholders.

Gene Munster, managing partner at Deepwater Asset Management, expressed skepticism about Instacart's prospects. He noted that the initial surge in the stock price was typical of an IPO and may have been misleading. Munster pointed out that Instacart's unit growth has been flat so far this year and questioned whether order growth would reaccelerate. He stated that his firm owns shares of Uber but not Instacart.

Analysts at Needham issued a "hold" rating on Instacart's stock, citing difficulties in the company's growth over the next three years. They believe that post-pandemic online grocery sales in the US may not meet consensus expectations and see structural challenges to adoption.

In other IPO news, marketing automation company Klaviyo debuted on the market and initially saw its stock rise 23% to $36.75. However, it has since lost some of those gains.

Overall, Instacart's disappointing stock performance highlights the cautiousness among investors when it comes to tech disruptors in traditional markets. The company will need to address concerns about its growth potential in order to regain investor confidence.


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