A New CEO at Blue Apron Isn't the Missing Ingredient

The meal-kit provider sees a bearish analyst turn neutral after it nixed a co-founder CEO, but sparking a turnaround isn't as simple as that.

Rick Munarriz
Rick Munarriz
Dec 4, 2017 at 4:12PM
Consumer Goods

There's change coming at the helm of Blue Apron (NYSE:APRN), but don't let the buoyant market reaction lull you into thinking that anything will actually change for the company. Shares of the leading meal-kit provider moved higher late last week after it announced that co-founder Matt Salzberg was stepping down

The rally continues this week, as Barclays analyst Ross Sandler is boosting his rating from underweight to equal weight. He is raising his price from $3 to $4, a goal that the stock hit within the first hour of Monday morning's trading. Despite one Wall Street pro seemingly calling for a bottom and the tantalizing notion that new leadership can turn a struggling business model around, it would be naive to think that the best days for Blue Apron lie ahead. 

A family preparing a Blue Apron meal kit.

Image source: Blue Apron.

Food for thought

Blue Apron has been one of this year's worst-performing IPOs. The stock begins this week trading more than two-thirds lower than its $10 summertime IPO price. It's been a rough run for the top dog in providing mail-delivered kits of fresh ingredients with step-by-step instructions for cranking out gourmet meals.

The same company that went public under the guise of being a growth stock -- with revenue rising a hearty 42% in this year's first quarter -- spooked investors by clocking in with a mere 18% top-line growth for the second quarter, its first report as a public company. Things only got worse last month, with Blue Apron's third-quarter financials showing just 3% in revenue growth and a forecast for an outright decline of 12% to 22% during the fourth quarter. 

Sandler at Barclays feels that risk-to-reward ratio is favorable at present level, and he likes the change at the top. However, even the analyst concedes that this remains a highly competitive niche where hungry rival HelloFresh is gaining market share at Blue Apron's expense. These are things that a new CEO can't fix.

It's hard to get excited about Blue Apron just because the stock price is low. Sequential declines in active customers, orders placed per customer, and average order volume are devastating, and there's little reason to believe that these trends are reversible. A buyout -- a real possibility as the price continues to shrink -- could give Blue Apron investors the merciful exit strategy they crave and a supermarket or e-commerce giant the new revenue stream it needs. Blue Apron won't be going to zero anytime soon, but there's no reason to think it will ever claw its way out of the single digits.