Shares of Blue Apron Holdings, Inc. (NYSE:APRN), a well-known meal delivery company with services that include Blue Apron Meals and Blue Apron Wine, among others, are on the move again. The company's shares were down 7% at 11:30 a.m. Tuesday after it received its first Wall Street analyst rating -- and it didn't paint a rosy picture.
Despite Blue Apron lowering its IPO range from between $15 and $17 and opening at $10 on June 29, Wall Street still isn't buying the story. Chuck Cerankosky of Northcoast Research opened coverage on Blue Apron with a price target of only $2, which is a fraction of its current trading price of about $7.60. In Cerankosky's note, he rated Blue Apron as a "sell" with the price target just above pro forma net assets per share and went on to mention that sales growth appears dependent on promotional discounts and is hampered by high labor and shipping costs.
This "sell" rating won't come as a surprise to many investors, as the company's marketing costs are increasing, revenue per customer is declining, and it continues to burn through cash at an accelerating rate. In addition to its rough financials, its IPO enthusiasm was squashed by Amazon.com's (NASDAQ: AMZN) entry into the grocery arena with its announced blockbuster acquisition of Whole Foods Market (NASDAQ: WFM). It's very possible that Amazon will put together a similar business model with significant financial clout behind the project, and even if that doesn't materialize, Blue Apron already faces a long list of competition with other meal delivery services as well as a fiercely competitive fast-casual restaurant industry fighting for similar consumers.
Investors seem to be selling Blue Apron today because Wall Street is saying what everybody is thinking: This doesn't look like a solid investment.
John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Whole Foods Market. The Motley Fool has a disclosure policy.