In this segment from the MarketFoolery podcast, host Mac Greer, Total Income's Ron Gross, and Million Dollar Portfolio's Matt Argersinger consider the roller-coaster ride that has been Blue Apron (NYSE:APRN) -- which since the much-anticipated IPO has been mostly downhill.
There's just too much competition in this subscription niche, and Blue Apron is failing to acquire and hold subscribers at a sustainable cost. Can it find its footing after these job cuts? And is there anywhere it can go from here to make it an attractive investment?
A full transcript follows the video.
This video was recorded on Oct. 19, 2017.
Mac Greer: Blue Apron, the meal kit delivery company, laying off 6% of its workforce. Ron, it's been, in addition to delivering meals, it's delivered a lot of bad news to investors since going public back in June.
Ron Gross: Tough row to hoe.
Greer: This is a new public company, and the stock is now trading at around half of its IPO price.
Gross: It's tough. It was a bad month to go public, right when Amazon said they were going to be acquiring Whole Foods, so everyone got nervous. Valuations started moving around for the competition. Speaking of competition, there's just too much of it. Whether you're HelloFresh or Blue Apron or Sun Basket or Green Chef, Plated, too many players trying to go after the same demographic. And that's not going to work. So, not everyone is going to make it. I don't know if consolidation makes sense, or if we're just going to see folks go out of business. At the heart, this is a subscription business. It's all about cost of customer acquisition and retention, and how much you can charge for the subscription. And those things are tough. And they have to get it right, and there are too many players chasing the same dollar.
Greer: Matt, what do you see?
Matt Argersinger: My wife and I love HelloFresh, we get it almost every week. I like the idea behind a meal kit. I just think, as Ron pointed out, there's just so many competitors, they're having to pay so much to acquire new subscribers. There has to be at least some consolidation or something that's going to happen in the marketplace, or maybe a Whole Foods or an Amazon or a bigger grocery chain will acquire one and maybe be able to do it in a cost-effective way. But right now, for investors, there's not a lot there.
Greer: Ron, what's more likely out of these two scenarios: either Blue Apron goes private, or Blue Apron gets acquired?
Gross: That's a toughie. I'm not sure why a private equity investor would want them, and what they think they could do to them to make them more profitable and then take them public again down the road. So, perhaps an acquisition or consolidation, I think I would bet on that more so than private.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Mac Greer owns shares of Amazon. Matthew Argersinger owns shares of Amazon and has the following options: short December 2017 $900 puts on Amazon. Ron Gross owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.