Kroger has $130 billion in sales and $3.4 billion in operating income, and Instacart is due to be worth over twice what Kroger is? That's going to end well.
If Instacart had demonstrated extreme margins, such that their business was going to be a long-term high growth, high margin big tech monster, then sure, maybe they'd be worth considering at 1/2 to 1/3 the expected price on the basis of a sweet growth curve over many years.
I'll consider their stock after it implodes down to a more sane valuation, assuming they're not drowning in red ink at that time. The end of the pandemic is going to be brutal on their growth rate as many years of growth were artificially pulled forward in time to the present (and plausibly a lot of growth they're not going to hold on to, the penalty for that will be negative). They'll pay for that with lower growth rates in the coming years, which is exactly what you don't want to see if you're buying them at a $50b market cap.
Oh I know, but we're in the super bubble, low interest rates mean stocks don't go down. Hello Snowflake (44% haircut so far), hello Tesla (30% haircut so far), hello DoorDash (40% haircut so far).
I hear what you're saying with the case for inflated fundamentals, and we are for sure in a super bubble as you said. The examples you note are also pretty good points of data for your case. But think about the other side. If Instacart would've been invented by Kroger (or any other grocery blue chip), why wasn't it?
There's a reason why that's the case, and that is the premium that investors are paying for. An enormous part of the bull case for Instacart, much like other tech companies, is that they are highly leveraged marketing operations which operate on zero marginal cost of distribution. Granted, Instacart is definitely more of on the operational side than pure marketing, but you could say the same thing about Amazon. Amazon's advertising revenue line has experienced breakneck growth over the past few years; from what I hear, the same is occurring with Instacart.
If you put all of that together, it doesn't really make sense to compare Instacart to a blue chip company that operates in its space because they operate completely and allocate capital completely differently. You wouldn't compare Amazon to Sears.
If Instacart had demonstrated extreme margins, such that their business was going to be a long-term high growth, high margin big tech monster, then sure, maybe they'd be worth considering at 1/2 to 1/3 the expected price on the basis of a sweet growth curve over many years.
I'll consider their stock after it implodes down to a more sane valuation, assuming they're not drowning in red ink at that time. The end of the pandemic is going to be brutal on their growth rate as many years of growth were artificially pulled forward in time to the present (and plausibly a lot of growth they're not going to hold on to, the penalty for that will be negative). They'll pay for that with lower growth rates in the coming years, which is exactly what you don't want to see if you're buying them at a $50b market cap.
Oh I know, but we're in the super bubble, low interest rates mean stocks don't go down. Hello Snowflake (44% haircut so far), hello Tesla (30% haircut so far), hello DoorDash (40% haircut so far).