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$5.$ To calculate the price per $($equity$)$ share, you must divide the total equity value by the number of shares outstanding. Instacart has $335$ million shares outstanding.

Autumn $2023$ FIN $350$ Valuation Case

Due Wednesday, Nov ${29}^{th}$

$6.$ Next, perform some sensitivity analysis using the Upside and Downside scenarios to compute Upside and Downside stock prices.

a$.$ Use the High Revenue Growth assumption to compute a new stock price estimate if revenues grow faster at first.

b$.$ Reset your revenue growth assumptions to the Base Case and check the sensitivity of the valuation to the assumptions about Instacart's ability to control costs. The Base Case assumes that expenses as a percent of revenue will pretty quickly get down to and stabilize at $67\%,$ but this could be optimistic, especially if competition requires more advertising. For the Downside scenario, apply the High Costs assumptions to see what the impact would be of slower cost control.

$7.$ What would be needed for your DCF model to produce a price of $$42$ per share $($the high price on the first day of trading$)?$ Specifically, by changing your revenue growth or cost assumptions, find a set of assumptions that would produce a stock price of approximately $$42.$ You should comment about the reasonableness of these assumptions in your writeup. $[$NOTE: There are many combinations of assumptions that will work$-$there is no 'right' answer here.$]$

$8.$ An alternative way to value a stock is by use of multiples. $[$NOTE: There is no reason to expect the multiples$-$based valuation to agree with your DCF$-$based valuation because different assumptions underly the two methods.$]$

a$.$ Multiples valuation should be forward looking, so start with Instacart's Base Case ${2024}_{?}$ projected Earnings Before Interest, Taxes, Depreciation and Amortization $($EBITDA$,$ a standard cash flow measure$)$ from your DCF and compute its total Enterprise Value$-$toEBITDA ratio. Enterprise Value is Equity Value $-$ Cash $+$ Debt $($post$-$IPO, Instacart has $$2\mathrm{.}8$ billion in cash and not enough debt to be material$).$

b$.$ Compare this with the ratios for: Uber $($EV$/$EBITDA $=16\mathrm{.}9),$ DoorDash $(19\mathrm{.}3),$ and a global mobility comparison set $(14,9).$ Be sure to comment on whether Instacart's multiple seems reasonable given its growth prospects.

c$.$ If you were to apply the comparison multiples to Instacart's $2024$ EBITDA, what share prices would that imply? $($Take $2024$ EBITDA x Multiple as your new total Enterprise Value, convert to equity by adding in the cash and calculate the share price from there.$)$