Blue Apron Holdings (NYSE: APRN) stock has started the week with a dive after arriving at a deal to sell around $15m worth of its common stock. The company has reached a deal with Canaccord Genuity for it to act as sales agent, with the deal allowing the business to sell the shares gradually over time.
Blue Apron says net proceeds from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures.
Additionally, the company has announced that Chief Financial Officer Randy Greben will be leaving his role in mid-October.
In response to these pieces of news, APRN stock has dived by more than 45%.
What is Blue Apron?
This business operates a direct-to-consumer platform that delivers original recipes with fresh and seasonal ingredients.
It also operates Blue Apron Market, an e-commerce market that provides cooking tools, utensils, pantry items, and other products.
In addition, the company offers Blue Apron Wine, a direct-to-consumer wine delivery service that sells wines, which can be paired with its meals.
It serves young couples, families, singles, and empty nesters.
The company offers its services through order selections on Website or mobile application primarily in the United States. Blue Apron Holdings, Inc. was founded in 2012 and is headquartered in New York, New York.
How Does Blue Apron Make Money?
Blue Apron makes money by attracting customers to make purchases through its online storefront or sign up to its various subscription services.
APRN Stock Financials
APRN stock has a price to sales ratio of 0.36 and a price to book value of 3.69. These compare with respective averages of 0.22 and 3.33 for grocers, according to CSIMarket, potentially indicating that the stock is marginally overvalued.
Blue Apron’s most recent earnings showed flat revenue of $124.2m in the three months ended 30 June, though net loss deepened from $18.6m to $23.1m as the company faced steeper operating expenses.
Marketing and costs of goods sold were the biggest drivers behind this, increasing by 33.4% and 4.6% respectively.
Including today’s drop, APRN stock has fallen by more than 49% across the year to date and by more than 55% across the last 12 months. Considering the company’s IPO in June 2017 saw it being priced at north of $11, the share price at the time of writing of $3.27 represents a significant loss to initial investors.
As of September 29, 2022, the company said it had approximately $32.1m in cash and cash equivalents. The company has stated that it is owed $69.4m under two separate agreements but estimates that its cash and cash equivalents, along with the net proceeds from its newly announced offering, will be sufficient to meet anticipated cash needs until sometime in the first quarter of 2023.
The company does not distribute a dividend to its shareholders.
APRN Investment Risks
The primary risk that the business faces is that it is currently losing customers. The business's most recent earnings update showed that its customer base had declined by 18,000 people to 349,000 customers in the second quarter. This also leaves the business significantly behind where it stood at the same point 12 months prior, when it had 375,000 customers.
Orders per customer were also slightly down at 4.9, compared with 5.3 in Q2 2021, though average order value has climbed from $62.72 to $67.14 across the same time frame.
This comes as the business’ cost of sales is increasing due to inflationary pressure, as well as an increase in shipping and fulfillment packaging costs driven by carrier rate increases and fuel surcharges.
As such, there appears to be a significant danger that the business will continue to see falling customer numbers, while also being unable to significantly lower prices as an incentive for new customers to join.
The business claims that a new brand campaign launched in April 2022 has led to significant success, with higher traffic passing through its website, so perhaps the business’ higher marketing spend will lead to the resurgence in paying customers that Blue Apron needs.
However, the business faces significant competition from the likes of Gousto and HelloFresh, with a number of other meal kit businesses having emerged since Blue Apron’s dominance of the space back in 2015 and 2016.
Is APRN Stock a Good Investment?
Though it achieved enormous growth in the mid-2010s, Blue Apron now looks like a shadow of its former self. The business is struggling to attract new customers while battling higher expenses as the cost-of-living crunch turns consumers on to cheaper options.
Even worse, the consumers who are willing to fork out for meal kits could well be attracted to Blue Apron’s growing number of competitors. What's more, the efforts to raise money with the recent share sale have understandably made investors jittery.
On the positive side, the business claims a recent marketing push has been encouraging and its partnership with Walmart (NYSE: WMT) could introduce its product to an enormous new audience.
However, it’s difficult to see the stock having much short- or medium-term success in such a challenging environment and competitive sector.
Even so, the three analysts listed by the Wall Street Journal who cover the stock offered a consensus rating of Buy and an average target price of $9.25.