Maplebear Inc. (NASDAQ:CART): A Stock Worthy of a Shopping Spree

We came across a bullish thesis on Maplebear Inc. (NASDAQ:CART) on ValueInvestorsClub by HonkyRed. In this article, we will summarize the bulls’ thesis on CART. The company’s shares were trading at $44.00 when this thesis was published, vs. the closing price of $41.09 on Feb 28.

A customer shopping for lifestyle and beauty products at a physical store.

CART engages in the provision of online grocery shopping services to households in North America. It sells and delivers grocery products, as well as pickup services through a mobile application and website. Many investors are concerned over the losing market share to players like DoorDash and Uber but CART is strongly positioned, capturing 70% of the pure-play grocery and large basket ($75) segments. In contrast, DoorDash and Uber have a smaller basket size and unfavorable unit economics that often turn negative.

The penetration of online grocery is at a low level of 14% with CART being a recognized player in this segment, having 12 years of experience. At its peak, it commanded a market share of 24% vs. 19% now. It captures the third largest market share, trailing behind Walmart (34%) and Amazon (24%).

The financial performance of CART has also been improving since its IPO launch. The markup to customers has been pegged at 10% and profitability has been enhanced by reducing headcount by 7% in 2024. EBITDA margin stood at 26%, a significant improvement from 7% two years ago. EBITDA grew by 35%+ this year, with an 80% conversion to free cash flows. The Advertising business is a growth driver for CART, contributing to 1/3^rd of its revenues. The balance sheet is also robust with almost no debt and 10% of capitalization in cash even after $1.4 billion in buybacks.

The valuation can be based on mid-teen growth in EBITDA (half its current growth rate) with a 7% FCF yield on a cash flow of projected cash flow of $1.1 billion. This should provide a fair value of $59 for the stock price providing room for 44% growth in value from its current level. The 12-month trailing earnings multiple is also very undervalued at 3.89x.

While we acknowledge the potential of CART as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CART but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.