Believe It or Not, Blue Apron Stock Can Still Cook Up Something Good
If you’ve followed Blue Apron (NYSE:APRN) since its ill-fated initial public offering, I have nothing new to report: APRN stock still stinks. In fact, you can easily make the argument that at no point has APRN looked worse than it does now.
Since opening at $10, Blue Apron stock has lost nearly 90% of its market capitalization. After dropping firmly into dollar-menu territory, a delisting of APRN stock appears imminent. After all, the New York Stock Exchange doesn’t want a stinker like this muddying its waters.
Even worse, at no point did APRN stock justify the high valuation that it achieved in the wake of its IPO. Aside from a brief interlude that gave speculators some hope earlier this year, the meal-kit provider has endured a consistently negative trajectory.
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The reason is quite simple: while Blue Apron operates a trendy business, the company’s financials have been consistently negative for APRN stock. Management has delivered one disappointing earnings result after another, and its third-quarter results were no different.
Prior to the Q3 results, analysts’ consensus estimate called for a year-over-year revenue decline of more than 25% to $157.4 million. Instead, and as usual, APRN underperformed some of the worst estimates, delivering revenue of only $150.6 million. The other key metric, customer count, was just as sad, falling 25% from 856,000 to 646,000. Needless to say, average revenue per customer also fell, dropping from $245 to $233.
Put another way, if you’re looking for an excuse to sell APRN stock, you’ll find plenty of material. But rather than beat a dead horse, I wondered if contrarians have a remote opportunity to profit from Blue Apron stock.
Exploring the Risky Upside of APRN Stock
Because Blue Apron stock is deeply discounted, InvestorPlace’s Bret Kenwell suggested that Kroger (NYSE:KR), Target (NYSE:TGT) or Walmart (NYSE:WMT) could acquire the company. The idea certainly makes sense. Walmart recently agreed to allow Blue Apron to sell its meal kits online. WMT could eventually decide to buy the whole enchilada.
But acquisitions are difficult to predict. Are there better reasons to buy APRN ?
It turns out that Blue Apron’s products aren’t as horrible as the performance of APRN stock. According to Consumer Reports, the company’s core product scores very high. Along with great-tasting food, the company offers eclectic options. This diversity is quite appealing to the millennial demographic, and it’s even more attractive to Generation Z.
Plus, Blue Apron’s meal kits are relatively cheap. With all of these positive attributes, why has APRN performed so poorly?
The company is obviously losing money. But its declining revenue can’t be blamed on the quality of its product. In my humble opinion, poor marketing could be the culprit.
While meal-kit deliveries appeal to trend-setting millennials, many millennials don’t want to pay Blue Apron’s membership fee. However, Money reports that Blue Apron’s kits provide good value for those looking for high-quality food, i.e. many millennials.
Many millenials prefer to eat restaurants’ food, so they are willing to spend significant money on quality food. In fact, CNBC recently reported that nearly half of millennials spend more on food from restaurants than they save.
To Buy Or Not to Buy Blue Apron stock
I’m not going to mince words: Blue Apron stock has severe problems, the core of which is that the company is losing customers. But the flip side to this oft-told story is that Blue Apron’s problem is correctable.
Again, APRN is not doing poorly because its product stinks. If that was the case, I wouldn’t have any productive solutions. Instead, the company has a communication problem. Blue Apron is trying to appeal to a diverse, digitally-aware demographic that prioritizes exquisite culinary experiences. Since Blue Apron has products that should appeal to these people, and it can easily communicate with them, it really ought to perform better than it has.
Moreover, APRN can show older people some love, since they have the time and resources to invest in quality food, and most of them use the internet.
Blue Apron’s leadership can improve the company’s performance if it makes the right decisions. Personally, I’m not encouraged by their recent efforts, which focus on cost-cutting and do nothing to improve the business. But APRN stock does have strong consumer tailwinds. If the company can find a way to harness those tailwinds, APRN can seriously surprise folks.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
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