Instacart, an online grocery delivery company, is about to take on retail brokers. It's a test of investors' appetite for gig companies.

San Francisco-based Instacart, registered as Maplebear, will begin trading Tuesday under the name "CART" and, like most IPOs, will price the night before going public and celebrate the listing with its employees, a person close to the company told Barron's.

Instacart in Friday's filing indicated a valuation of $9.6 billion at the midpoint by pricing its units between $28 and $30. Its new valuation reflects a shift in market momentum from when it was valued at $24 billion last March after a valuation of $39 billion set late in a venture capital round a year earlier.

How much public market investors pay for Instacart depends in part on their faith in the future expansion and profitability of the so-called gig economy. The company, which uses contractors to deliver groceries to homes, is asking for $3.64 to $3.9 per dollar of revenue in 2022 based on its stock price and earnings.

Its closest peer, DoorDash (DASH), has a price-to-revenue ratio of 4.2 times future revenues. Other gig companies have lower ratios: Uber 2.8 times revenue and Lyft 1 times revenue. The price-to-sales ratio is a useful way to value startups because their economic performance is still evolving.

"I would say this valuation is fair," Matthew Tuttle of Tuttle Capital Management wrote in an email to Barron's. The advisory firm's CEO uses the Instacart app weekly and sees it benefiting from a surge in brick-and-mortar shoplifting and a potential resurgence of Covid-19. "This could be a home run."

Instacart, which was founded in 2012, had $2.55 billion in revenue last year, up 39% from the year before. Nearly three-quarters of the revenue was made up of fees paid by retailers and customers, including fees for the Instacart+ premium membership program. The rest came from Instacart Ads, a relatively new but crucial offering developed under the leadership of CEO Fidji Sim, a former Meta Platforms (ticker: META) executive appointed in 2021.

The ad business was up about 30% last year from the previous year. Retail partners typically sign contracts for less than a year and pay Instacart on a per-click basis, ad impressions or as a fixed fee for the duration of the contract, according to the filing. In its filings, Instacart called the advertising "highly profitable" but said future ad revenue may fluctuate because success depends on the ability to scale by acquiring new brands, customers and expanding into other markets.

"The advertising business is just taking off and it remains to be seen how well it will do," said Wharton School management professor David Hsu, calling Instacart "an ambitious play with a lot of uncertainty."

The food delivery company booked losses in 2020 and 2021. Net income last year was $428 million, but more than three-quarters of the profit came from what was described as a tax benefit.

Still, the excitement from Arm Holdings' (ARM) initial public offering, which saw the stock rise 10% in opening trading last week, and new listings in general could help Instacart get the value it wants or more on Tuesday.