Instacart Got Caught Surveillance Pricing... But Investors Didn't Care

America’s favorite grocery ordering and delivery app came under pressure earlier this month after it was found to have engaged in numerous unlawful tactics that harmed shoppers and raised the cost of grocery shopping for Americans. 

A joint investigation conducted by Consumer Reports and Groundwork Collaborative and published on Dec. 9, found that Maplebear (NASDAQ: CART), which does business as Instacart, was involved in surveillance pricing and price manipulation. 

Then on Dec. 18, the U.S. Federal Trade Commission (FTC) announced that it was levying a $60 million penalty against the company as a result of “deceiving consumers with false advertising, failure to provide refunds and unlawful subscription enrollment processes” in unrelated news. 

This year, the stock has underperformed the market, as has much of the consumer staples sector. But since its year-to-date (YTD) low on Nov. 6, Instacart is up more than 31%. When the news about its surveillance pricing broke earlier this month, the stock pulled back nearly 6%

But in the days that followed, shares had already bounced back nearly 6%. Here’s why investors shrugged off the company’s use of surveillance-based price discrimination, and why the FTC’s penalty didn’t deflate shareholders’ long-term expectations.

How Instacart Used Surveillance Pricing to Drive up Prices

The largest online grocery ordering and delivery app, Instacart serves approximately 14.9 million customers—up from 14.4 million in 2024—while having amassed an army of shoppers numbering around 600,000. 

Like other companies leveraging AI for various competitive advantages, Instacart turned to the technology to optimize its platform’s algorithmic pricing experiments. The AI model, which it implemented as far back as 2022, fueled a strategy that could be seen as an extension of dynamic pricing. 

But the tactics go well beyond dynamic pricing, with the report finding that “many U.S. shoppers who order grocery deliveries through Instacart are unknowingly part of widespread AI-enabled experiments that price identical products differently from one customer to the next.”

Those prices differed by as much as 23% per individual item from one Instacart customer to the next—a technique the company refers to as “smart rounding,” according to an inadvertently released email.  

To insiders and shareholders, however, the strategy wasn’t entirely secretive. “Instacart has disclosed its pricing experiments in corporate marketing and investor materials,” Consumer Reports found, with those documents noting that shoppers were entirely unaware that they were participating in the company’s so-called pricing experiment.

Why Investors Shrugged off the Bad News

In response to the Consumer Reports investigation, Instacart confirmed it was using surveillance pricing tactics to adjust its prices on a consumer-by-consumer basis. But charging different prices for products based on the customers isn’t illegal, nor is it a new practice in the United States.  

While the line between dynamic pricing and surveillance pricing is blurred, companies commonly maintain practices that see price fluctuations based on demand, location and a slew of factors.  

Take, for example, rideshare operators like Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT). Those companies both employ dynamic pricing—which they refer to as surge pricing—during periods of high demand. Their platforms adjust fares based on real-time supply, demand, traffic, time of day, location and even weather.

Then, there are Instacart's financials to consider. Not only was the company profitable before its IPO on Sept. 19, 2023, but it has also averaged 10.15% revenue growth over its last four quarters. At the same time, the company’s net cash from operating activities increased by nearly 88%. 

From an earnings perspective, it's much the same. Instacart has beat expectations in seven of the past eight quarters while only missing on revenue expectations twice during the same time frame.    

Wall Street Remains Bullish on CART

According to industry analysis and consultancy firm Grand View Research, the global online grocery market, which was estimated to be valued at more than $67 billion in 2024, is forecast to grow at a compound annual growth rate (CAGR) of 36.8% from 2025 to 2033. 

That will bring the overall market to an expected value of more than $992 billion by the end of the forecast period. And of that, Instacart plays a central role. 

The result is a bullish case from Wall Street. The 27 analysts covering CART have given it a consensus Moderate Buy rating and an average 12-month price target that is nearly 14% higher than where shares are trading today. 

Institutional ownership sits at more than 63%, with the smart money injecting $3.73 billion in inflows into Instacart over the past 12 months compared to $1.4 billion in outflows. And despite short interest currently coming in at 6.58% of the float, or $537 million, that figure represents a nearly 29% decrease from the previous period when it was $734 million. 

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