Please ensure Javascript is enabled for purposes of website accessibility

Can Blue Apron Stock Bounce Back After Last Week's 11% Drop?

By Rick Munarriz - Jul 23, 2017 at 11:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the do-it-yourself gourmet specialist keep sinking after Amazon steps up in the niche.

Blue Apron (APRN 12.42%) has a new and formidable competitor, and that's been enough to turn an already broken IPO into one of this year's worst performers among market debutantes. Shares of the meal-kit provider for foodies took an 11% hit during the week. Blue Apron has now surrendered nearly 35% of its value since going public at $10 late last month.

News that (AMZN -0.99%) is invading Blue Apron's turf came quickly. The week began with reports that Amazon filied a trademark application earlier this month for a do-it-yourself meal-delivery platform. Before the week was done, we saw Amazon start testing it out for its Prime Fresh customers in Seattle, and CNBC ran a segment in which a reporter tested the two products side by side. 

A meal kit from Blue Apron.

Image source: Blue Apron.

Red flags and blue aprons

Blue Apron is no stranger to competition. It's facing upstarts including HelloFresh and Plated, and there's been more than enough room for Blue Apron and its smaller peers to grow. Revenue more than doubled to $759.4 million for Blue Apron last year, and even a top-line growth deceleration to 42% in this year's first quarter is the kind of octane that most companies would love to have. 

The problem is that Amazon is a ruthless disruptor. It's been able to upend established industries at a distance, and after its $13.7 billion deal for Whole Foods Market and its 400-plus locations across the country, it will also have the advantage of a local presence in all of the leading foodie-centric metropolitan markets. 

Analysts were generally skittish about Blue Apron's prospects even before Amazon's bombshell. Chuck Cerankosky at Northcoast emerged as the most bearish of Wall Street pros earlier this month, initiating coverage of the stock with a "sell" rating and a brutal $2 price target. Cerankosky's dire prognosis was based on the inevitable considerable competition from conventional supermarkets that are also dabbling in meal kits. With Blue Apron's stiff shipping and labor costs -- and at the mercy of promotional discounts to attract new customers -- Cerankosky doesn't see a near-term end to the red ink.

A $2 price target for a stock at $6.55 may seem drastic, but this was a stock that underwriters were hoping to price at as much as $17 last month before settling for $10. In short, it's already lost nearly a third of what the shares were presumably worth a month ago.

We may eventually hit a bottom, but not until Blue Apron proves that it can thrive in an Amazon world. 

John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Rick Munarriz 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Blue Apron Stock Quote
Blue Apron
$3.35 (12.42%) $0.37, Inc. Stock Quote, Inc.
$139.41 (-0.99%) $-1.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.