(Bloomberg) — Instacart shares tumbled after the company posted weak fourth-quarter revenue and projected lower-than-expected adjusted earnings in the current period, stoking concerns from investors about its ability to grow without hurting its profit margins.
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Sales from delivery transactions for the last three months of 2024 were $616 million, the company said in a shareholder letter Tuesday, falling short of the average analyst estimate of $623.4 million, according to Bloomberg-compiled data. Total revenue came to $883 million, also missing projections.
However, for the fourth quarter the company beat on two key metrics: order volume and gross transaction value, which includes taxes, fees and tips.
Shares of Instacart fell as much as 13% after markets opened in New York on Wednesday, their biggest intraday decline in more than three months.
The disappointing report stands in contrast to US delivery rival DoorDash Inc., which provided a rosy order outlook two weeks ago after beating Wall Street expectations for the fourth quarter. Instacart also disappointed investors in November when it offered a soft forecast.
Instacart said in the letter that transaction revenue didn’t grow in proportion to gross transaction value because it made more investments into making the service more affordable and efficient for customers.
For the first quarter, Instacart forecast adjusted earnings before interest, taxes, depreciation and amortization to be $220 million to $230 million, also falling short of projections. Gross transaction value will be $9 billion to $9.15 billion, which is better than what Wall Street was expecting.
“Instacart may continue to face take-rate pressure from lower delivery fees in the near term amid slowing user and order-frequency growth,” Bloomberg Intelligence analyst Mandeep Singh said. “Though the company has added food delivery on its app, order volume is still about 8-10 times smaller than peers like DoorDash.”
Jefferies analysts said in a note late Tuesday that the disappointing earnings outlook raises questions about Instacart’s “ability to balance growth with profitability,” adding that gains in the high-margin advertising business have been flat for five straight quarters.
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