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 1/3rd 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.
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This article was originally published at Insider Monkey.
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