What happened

Shares of meal kit delivery service Blue Apron (NYSE:APRN) surged on Monday after initial analyst coverage on the stock proved mostly positive. The majority of analyst ratings were the equivalent of "buy," the first real piece of good news for Blue Apron investors. Shares of Blue Apron were up about 10.5% at 10:45 a.m. EDT.

So what

Blue Apron stock has tumbled since the company debuted at $10 per share, trading for just $6.55 at the end of last week. Concerns about customer turnover, exploding marketing costs, growing losses, and intense competition from other meal kit services and the soon-to-be Amazon-owned Whole Foods Market gave investors plenty of reasons to avoid the stock.

Analysts are far more optimistic.

Firm

Rating

William Blair

Market Perform

Needham & Company

Buy

SunTrust Robinson Humphrey

Buy

Oppenheimer

Outperform

Canaccord Genuity

Buy

Stifel

Buy

RBC Capital

Outperform

Goldman Sachs

Buy

Barclays

Equal weight

Morgan Stanley

Equal weight

Data source: StreetInsider.com.

Stifel sees Blue Apron's supply chain and logistics network differentiating it from competitors, downplaying the threat of Amazon. Goldman Sachs predicts that over-investment in the meal kit industry is driving up customer acquisition costs, and that a normalization will eventually occur. It expects Blue Apron to emerge as a leader.

Oppenheimer has set a price target of $11 per share, nearly 70% higher than Friday's closing price. The lowest price target, from Northcoast Research and announced on July 11, is a measly $2 per share.

A Blue Apron box containing ingredients.

Image source: Blue Apron.

Now what

Analysts may be rallying behind Blue Apron stock, but the company is facing a slew of issues. The biggest one is the simple fact that Blue Apron, and all meal kit services, are dramatically more expensive than the grocery store, despite marketing that says otherwise. At $9 to $10 per serving, Blue Apron is priced similarly to a fast-casual restaurant.

It's no wonder that the company is having trouble keeping customers on board, given the pricing. The average customer orders just 4.1 times per quarter, suggesting that plenty of people are trying the service, but few keep ordering. While Wall Street seems to be buying the growth story, investors shouldn't bet on what is ultimately a trendy way to overpay for groceries.

John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Timothy Green 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.