Blue Apron Holdings Inc (NYSE:APRN) has had a tough run during its short time on Wall Street. The meal kit delivery startup executed its initial public offering in late June at a below-expected $10 per share. APRN stock struggled for gains its first day, and has since been steadily heading lower.
Investors have been worried about how much of a future Blue Apron really has, fearing that Amazon.com, Inc. (NASDAQ:AMZN) might come to (excuse the pun) eat its lunch.
Those fears have materialized Monday in an announcement that has APRN stock against the ropes.
Amazon, which already sells other companies’ meal kits, reportedly is about to start selling kits of its own. In a July 6 trademark application, AMZN announced its intention to launch its own Amazon meal kits, which will comprise of meat, poultry, fish, seafood, fruit, and vegetables.
“We do the prep. You be the chef.” That is the Amazon meal kit motto.
Blue Apron is getting killed as a result. APRN shares are off 8% to all-time lows this morning, and at roughly $6.75, are off more than 30% from their IPO price.
That’s not good, and things aren’t about to get any better.
Blue Apron Is Just Another Amazon Victim
Blue Apron actually plays in a lucrative space. The at-home food market is booming, supported by some very strong secular trends. Consumers want to be healthier, and this is especially the case among younger consumers. Eating at home makes this easier.
Consumers want to save money, and again, this is especially true among cash-strapped younger consumers who are often burdened by student debt. Low wage growth also plays into the whole “saving money” trend. Again, eating at home helps them out.
There also is a paramount shift in consumer decision making right now from buying products to buying experiences. Driven in large part by younger consumers, the U.S. is migrating to an experience-driven economy. And cooking at home is definitely an experience. Meal kits, a shortcut, simply allow for that experience with greater convenience. There is no going to the store, avoiding carts in aisles, waiting in lines, or any of the hassles (one might call them, ahem, experiences) involved with shopping for groceries.
So the space is booming for all the right reasons, and it shows in Blue Apron’s numbers. In 2014, Blue Apron’s revenues came to $78 million. That swelled to $341 million in 2015 before sales more than doubled to $795 million in 2016. That’s some huge growth, and it underscores just why APRN stock at least seemed like an interesting play.
The problem is that there’s not much moat here. The company simply prepares meal kits and delivers them to consumers, which almost anyone — say, Amazon — could do.
Amazon is supremely positioned to excel at this service. It’s already the go-to e-commerce platform where consumers can get things cheaply and conveniently. It is already ingrained in consumers’ minds that if you’re going to get it online, you might as well start with Amazon.
Then there’s scale. With about 85 million Prime members and warehouses all over the U.S., the company has both the reach and infrastructure to quickly scale Amazon meal kits into a national offering. The recent acquisition of Whole Foods Market, Inc. (NASDAQ:WFM) only enhances Amazon’s reach and scale.
Bottom Line on APRN Stock
Blue Apron was going to have trouble fending off would-be usurpers once they understood just how successful Blue Apron was and how short the barriers to entry were.
But now, APRN looks like a dead stock walking very quickly out of the IPO gate — an Amazon victim with very little history compared to brick-and-mortar retailers, and little it can do to save itself.
Expect APRN stock to be a fun trade up and down in short bursts, but expect the long-term trend to be down until a larger tech giant tries to scoop it up at a discount or the company goes bust.
As of this writing, Luke Lango was long AMZN.
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