Blue Apron (APRN) Investors Can't Stand the Heat, Stock Falls Again
Blue Apron APRN, one of the newest stocks on Wall Street, simply can’t stand the heat. The meal kit delivery service company tanked again on Tuesday, slipping further below its IPO price after one of the first significant analyst price targets was announced.
Shares of Blue Apron fell 6.88% in morning trading Tuesday. Today’s downward movement comes after Chuck Cerankosky of Northcoast Research gave the fledgling public company a $2 price target. The low price point comes in $8 below its $10 opening price point, which was already far lower than the initial $15 to $17 per share price Blue Apron hoped to go public at.
In his note, Cerankosky wrote that Blue Apron’s sales growth is dependent on discounts, which he sees as a highly unstable, non-growth business model. He also mentioned that high labor and shipping costs might negatively impact the meal delivery company.
One of the first big Wall Street “sell” signals is the latest in a string of blows to Blue Apron in its early days on the stock market. The company is already one of the worst performing 2017 IPOs year-to-date.
"The trading on this has been just awful," Kathleen Smith, principal at Renaissance Capital, told CNBC last week. "Some of it is the Amazon fear but that's not the only thing. Some of it is the IPO market itself. Investors are jumpy around valuation."
Amazon’s AMZN planed acquisition of Whole Foods WFM, which was announced right before Blue Apron’s IPO, has contributed to the company’s early woes. The fear is that the size and scope of Amazon’s gigantic delivery service, which already includes food, will easily be able to outstretch Blue Apron’s reach with Whole Foods in its portfolio.
On top of the potential Amazon and Whole Foods impact, Blue Apron’s customer retention rate has proved worrisome. According to a recent Motley Fool report, 50% of Blue Apron customers placed a second order the week after their first order. However, after 24 months, the customer retention rate falls to just 10%.
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