Why is there business logic behind the sale rumors, yet institutions are not optimistic about a near-term deal?

  • The Information reported that Instacart was exploring a sale and had made preliminary contact with DoorDash and Uber. The news sent its share price up 9%; Bloomberg later reported that Uber had exited the discussions. No deal has been announced.
  • Bernstein recognizes the logic of a sale: Instacart has valuable retailer relationships and customers who shop frequently with large baskets, but acquiring new customers is its biggest challenge amid intensifying competition. Joining a larger platform could use its traffic and capital to accelerate expansion.
  • The institution’s doubts concern timing and buyer interest. The rumors began with Instacart actively seeking a sale; DoorDash is also advancing its own grocery business, and it is unclear whether an acquisition would be more cost-effective than continuing to build it.

Why does Uber have a greater need, while DoorDash is more likely to buy?

  • Uber’s US grocery retail business is smaller, which is why Bernstein sees a greater strategic benefit for it. But Uber has recently committed more than 20 billion dollars to completed and pending acquisitions, and also has plans to invest 10 billion dollars in autonomous driving over the coming years and to repurchase shares. Spending another 15 billion–20 billion dollars on Instacart now could add further to its debt burden.
  • DoorDash faces fewer financial constraints, provided it is interested. It is integrating several assets, including Deliveroo and Wolt, and has already built a sizable grocery business. Compared with the time when Instacart traded at 30–35 dollars per share and DoorDash’s business was less mature, the need to act now is harder to explain.
  • A shrinking pool of high-quality delivery assets available for acquisition, together with neither party wanting Instacart to fall into a rival’s hands, could create urgency. Approval will depend on how the market is defined. Third-party delivery accounts for a small share of overall grocery consumption, but regulatory scrutiny would be more challenging if the focus were on the online market or retailer customers.

How could an acquisition improve profits, and which synergies might be reduced?

  • The first source of cost savings is overlapping functions. Bernstein expects Instacart’s GAAP research and development, administrative and marketing expenses in 2026 to be 725 million, 417 million and 957 million dollars, respectively. After a merger, spending could be streamlined and customer acquisition costs reduced; the buyer might also reinvest the savings in growth, slowing the realization of profits.
  • Revenue synergies would come from a denser delivery network, a larger retail advertising platform and cross-selling. But existing users already overlap, especially with DoorDash, so incremental sales cannot simply be calculated by adding user counts; combining dual memberships into one would also mean losing some subscription revenue.
  • For DoorDash, another benefit would be improving the commissions it charges merchants. Bernstein believes that, as a later entrant, DoorDash previously priced aggressively, weighing on the economics of its grocery business. Combining with Instacart and strengthening retailer relationships could, alongside improved network efficiency, accelerate the business’s path to profitability.

How is the acquisition scenario of 68–74 dollars per share calculated?

  • Before the news, Instacart traded at 7.6 times expected adjusted EBITDA for 2027; after the news, the multiple rose to 8.3 times. Using the acquisition multiples for Delivery Hero and Deliveroo as references, Bernstein modeled a scenario at approximately 11–12 times, corresponding to 68–74 dollars per share.
  • The calculation uses consensus adjusted EBITDA of 1.48 billion dollars for 2027, approximately 254 million shares and a net cash adjustment. Relative to the pre-news closing price of 51.7 dollars on 22 October, the premium is approximately 32%–43%. Assuming this acquisition price range is accepted, the bank interprets the post-news share price as implying a deal probability of approximately 25%.
  • This acquisition scenario is separate from Bernstein’s regular 60-dollar price target for Instacart: the former addresses potential deal pricing, while the latter is derived from a valuation method that gives equal weight to valuation multiples and discounted cash flow.