Instacart (NASDAQ:CART) was lifted to Outperform from Peer Perform at Wolfe Research Wednesday with a new price target of $35 per share.
Analysts told investors in a note that they believe the risk/reward is attractive at current levels and see several paths for shares to Outperform, including a potential merger with Uber (NYSE:UBER).
"We believe CART has many levers to improve monetization and grow EBITDA MT. Furthermore, we think CART's current asset value is too cheap, presenting the optionality of a merger with UBER," analysts wrote.
Wolfe Research believes Uber could explore a merger with CART to accelerate efforts in the critical $1 trillion grocery space. In addition, they noted the financial synergies on revenues and costs being significant, as well as regulatory risks appearing minimal.
Meanwhile, CART could entertain a merger with Uber as the competitive risks are rising, while product initiatives aimed at GTV reacceleration have been less impactful so far.
"While UBER's fundamentals are solid MT, grocery is a key category to sustain growth LT, and competition is making rapid progress," analysts said. "Second, UBER has a favorable cash position and val levels that could make the transaction accretive."
"Press sources [previously] reported CART was exploring a sale under prior CEO in 2021. While CART has achieved nice progress under the current team, MT growth outlook is sluggish. The upcoming lock up expiration could further pressure shares," analysts added.