CART Stock Just Crashed 8% on a Record Quarter — Is Wall Street Wrong Again?

The way the plot of CART subtly changes is what takes you by surprise. The headlines refer to it as a wounded IPO one quarter and a compounder the next. The stock then plummets eight percent before lunch on a Wednesday in May after Maplebear reports its first billion-dollar revenue quarter. It’s difficult to avoid the impression that the company and the market are reading two entirely different scripts as this develops.

The numbers are not nuanced in and of themselves. $1.02 billion in revenue, a 14% increase. For the first time, the gross transaction value exceeded $10 billion in a single quarter. $144 million in net income, up 36% from the previous year. At $286 million, advertising revenue is expanding at the quickest rate since late 2023. These are not the numbers of a troubled business. However, the May 6 tape revealed a different picture, with shares falling so sharply that Cantor and other analysts had to defend the setup the following morning.

It seems that traders weren’t at all alarmed by the previous quarter. It was the second-quarter guidance, which showed GTV growth of 11 to 13 percent, a slight but noticeable slowdown from the recently reported 13 percent. Almost casually, CFO Emily Maher noted that Q1 had profited from Canada’s late repeal of its digital services tax, a windfall that would not return. When the word “moderate” was mentioned, the market became fixated on it and made the decision to sell first and consider other options later.

Although many casual observers still refer to Instacart as a delivery app, this is no longer the case. The business has been discreetly transforming itself into something more bizarre and intriguing: a grocery technology platform with a rapidly expanding advertising business strapped to its side. More than 310 retailers are part of the Carrot Ads network, and more than 9,000 brands are currently running ads on the platform. The ad take-rate continues to rise. Bulls consistently point to that rather than the delivery economics.

Then there’s the AI component, which the business is surprisingly aggressively pursuing. About 25% of American consumers currently use Cart Assistant, the conversational shopping tool. In order to expand into Europe and Latin America, the company recently acquired Instaleap, is integrating with ChatGPT and Claude, and has deployed Caper smart carts in over 100 cities. After just nine months on the job, CEO Chris Rogers talks about creating “the gold standard of agentic experiences.” That is the type of phrase that either ages beautifully or horribly, and it is currently impossible to predict which will happen.

The math is actually fascinating for long-term investors. According to some valuation models, fair value is higher than $60, which suggests an upside of about 50% from current levels. The authorization for the buyback was recently increased by an additional billion dollars. With $880 million in cash at the end of the first quarter, management opened a new $500 million credit line just in case. Businesses in real trouble don’t act this way.

Doubts persist, though. Due to $60 million in regulatory settlements, free cash flow decreased by 10%. The same grocery dollar is the focus of DoorDash, Amazon, and Coupang. The more general question, which Rogers is still unable to fully address, is whether AI tools that enable conversational shopping will benefit Instacart or eventually circumvent it completely.

CART is currently trading like a stock that the market is still debating. Compounder, according to the basics. The chart displays a question mark. The truth is most likely somewhere in the middle of those two readings; for patient investors, that gap may represent the whole opportunity.