Stock Market

Instacart (NASDAQ:CART) is an online grocery delivery platform that went public on Sept. 19 at $30 per share, valuing the company at $39 billion. The initial public offering (IPO) was one of the most anticipated of the year, as Instacart had benefited from the surge in demand for grocery delivery during the pandemic.

However, the company faces a number of challenges that could undermine its growth prospects and profitability. This underscores why Instacart’s shares have plummeted more than 15% since its IPO.

As Instacart’s investor day is just around the corner let’s take a look at three things investors should watch for.

Order Volume Trends and Possible Growth Catalysts

Instacart competes with well-established players in the grocery industry, and this could eventually hamper future growth prospects. For example, Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), Kroger (NYSE:KO) and Costco (NASDAQ:COST) all have their own delivery services, partnerships, and dedicated end users of said services. Investors have already begun to doubt whether or not Instacart can meaningfully increase order volumes throughout the next quarters.

The overall strategy on how Instacart will meaningfully increase order volume will have to be an important part of the company’s presentation. Moreover, having an actionable plan for juicing growth can also have positive network effects as partners and advertisers will be more willing to increase their spend on the platform.

Assurance on Gig Economy and Regulatory Concerns

Instacart relies heavily on gig workers to pick up and deliver groceries from partner stores, and this could expose it to certain regulatory actions. Legal battles concerning how to classify gig economy works have already continued to ensue in the California court system and could potentially do so elsewhere in the states. Though regulatory concerns are often minor, as regulatory agencies become less permissive and labor strikes become even more prevalent, investors should require some guidance around how Instacart will maneuver around these burgeoning issues.

Increased living standards, largely brought on by elevated inflation, has caused thousands of workers in various industries, from the automotive industry to healthcare, have decided to go on strike. The gig workers that Instacart employ are in a different context because they are not unionized. But if living conditions worsen, more gig workers could find themselves asking for more benefits or compensation, putting gig economy companies like Instacart in a tough spot.

New Partnerships

Instacart’s slowing growth numbers requires growth catalysts to justify further investment by public equities investors. There are a number of ways the grocery delivery platform could go about spurring transaction and order volume growth. One of those ways is through partnerships with companies that could eventually expand customer engagement on Instacart’s platform.

Last Wednesday, Instacart announced a new partnership with Mount Sinai Solutions, a division of Mount Sinai Health System. The partnership provides Instacart Health Fresh Funds grocery stipends as a benefit for post-operative and post-partum insured patients. The new program will not only help to alleviate challenges for patients who have undergone a major life event but also increase the number of customers utilizing Instacart’s platform.

Investors should look for more financial details on how this partnership is structured and how it will boost Instacart’s key performance indicators. They should also hope for the company to announce more partnerships like it.

On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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