Blue Apron has become one of this year's biggest IPO losers. It went public at $10 this summer, only to have shed 62% of its value. It may continue moving lower, as another analyst would go on to downgrade the stock following Blue Apron's rough quarter and even gloomier near-term outlook.
Stale is not a winning recipe
Customers pay up for the fresh ingredients that get pieced together for a tasty meal, and Blue Apron investors probably thought that they were getting the same when they bought into the dot-com speedster. It had grown its revenue at a 42% clip during the first quarter after more than doubling the year before. Blue Apron went public in late June -- just as its second quarter was coming to a close -- and the deceleration on the top line has been fierce.
Every quarter is seeing the model's sizzle deteriorate at an alarming rate. If the 18% top-line growth in the second quarter wasn't disappointing enough, the 3% uptick for the third quarter and guidance suggesting that fourth-quarter revenue will decline by 12% to 22% should do the trick.
Ross Sandler at Barclays has had enough. He's downgrading the stock from equal weight to underweight, slashing his price target from $5 to $3. He was holding out for a worse showing on the top line for the third quarter, but with Blue Apron bleeding free cash flow with no turnaround in sight it's hard to get behind the once compelling business model.
The platform's popularity is fading. It experienced sequential declines in active customers, average order volume, and the number of orders placed per customer. Bulls will argue that 856,000 people still paying for Blue Apron boxes will be compelling at some point, but with revenue going the wrong way and profitability unlikely to return anytime soon, there isn't a good reason to be excited outside of a possible buyout.
An acquisition isn't out of the question. There are enough grocery store chains and online giants that can gain in marketing Blue Apron to their loyal fan bases. Blue Apron's stock is now selling for a little more than a third of what it was when underwriters priced its IPO a little more than four months ago. Blue Apron's IPO may have been an exit strategy, and it's perfectly understandable if investors are dreaming of the same thing.