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Instacart's $500M Buyback Sparks 9% Rally, Options Traders Reap 230% Gains

Updated: Jun 8

Maplebear [Instacart] (CART) - ★★ - Ranked #75 in our Q2 2024 SMID Equity Rankings

In a significant boost to investor confidence, shares of Maplebear Inc., the parent company of grocery delivery giant Instacart, soared 9% on Thursday following the announcement of a new share repurchase program. The company's board approved an additional $500 million for share buybacks on June 2, as revealed in a regulatory filing.

The move comes after Instacart successfully completed two previous rounds of authorized buybacks totaling $1 billion, equivalent to approximately 34 million shares outstanding. The average price of these buybacks was $29.41 per share, which is notably lower than Thursday's midday trading price of $33.68, representing a 15% increase.

Share repurchase programs are often interpreted as a signal of management's confidence in a company's growth prospects and stock performance.

The company's robust financial health is evident from its balance sheet, which showed approximately $1.7 billion in cash and equivalents at the end of the latest quarter. This strong cash position easily covers the newly authorized $500 million repurchase program.

In March, our Q2 2024 SMID Equity Rankings assigned Instacart a ★★ ranking with a Negative short term outlook and a twelve-month price target of $44.00. Despite this cautious outlook, the recent share price jump has been a boon for bullish options traders. July 19 2024, $35 strike price call options saw a staggering 230% increase in one day, closing at $1.22 ($122) per contract, up from the previous day's close of $0.36 ($36).

As Instacart continues to dominate the online grocery delivery space, investors will be closely watching how this latest share repurchase program impacts the company's stock performance and long-term growth strategies.

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