Instacart (NASDAQ: CART) is in the red this morning after a Needham analyst assumed coverage of the delivery company with a “hold” rating.

Bernie McTernan sees risks and rewards associated with Instacart stock as balanced.

He expects online grocery sales to increase at an annualised pace of 12% over the next three years – down significantly from nearly 60% at the height of the pandemic.

The analyst also quoted findings of a recent survey in which 38% of the participants said they were not likely to use an online marketplace for grocery shopping over the next month.

McTernan, however, did not announce a price target on Instacart stock that’s trading at $31 and change at writing versus a high of $42 it touched as it debuted on Nasdaq a day earlier (read more).

The Needham analyst expects Instacart to see its ad business grow at a moderate pace from here on as the explosive phase is already behind it. The Nasdaq-listed firm generated about 30% of its revenue last year from advertising.

His research note today also cited rising competition as another challenge in the face of Instacart that is up against the likes of Uber, DoorDash, Amazon and even Walmart Inc.

Gene Munster of Deepwater Asset Management also recently picked Uber over Instacart stock.

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