One of last week's biggest gainers is also one of the more surprising winners in recent months. Shares of Blue Apron Holdings (APRN +0.00%) moved 16.1% higher last week, fueled in part by an analyst offering up some encouraging words about its distribution partnership with warehouse club giant Costco (COST +1.28%) with another Wall Street pro suggesting that Costco could just outright buy the gourmet meal-kit provider . The stock has more than doubled since bottoming out in early April.
We're not at the point where last year's IPO buyers are popping corks off champagne bottles. The stock continues to trade for less than half of last summer's $10 debutante price. However, momentum has clearly shifted in favor of the bulls lately.
Image source: Blue Apron.
Everything's on the table
Blue Apron's biggest gain came on Tuesday when former Goldman Sachs analyst Will Meade tweeted that Costco could emerge as an acquirer of Blue Apron.
Hearing rumors that $COST #Costco could buy $APRN @blueapron
— Will Meade (@realwillmeade) July 10, 2018
It's not the first time that Meade has passed on chatter about a potential buyer for Blue Apron. Three months ago -- shortly after the stock had bottomed out out -- he posted that "a little birdie" was telling him that a grocery store chain was interested in paying $3 or more for Blue Apron.
A little birdie told me $APRN @blueapron will be acquired by a grocery store chain for $3 or better
— Will Meade (@realwillmeade) April 18, 2018
The shares have gone on to break through the $3 ceiling, something that doesn't make the rumor any less likely but it will make it more expensive for a potential purchaser. There's never a dull moment when you have a busted IPO on the comeback trail with a large pool of short-sellers.
The week capped off with KeyBanc analyst Edward Yruma putting out a fairly encouraging note. Blue Apron began selling its meal kits through Costco in May, and Yruma reports that expansion of the partnership through more Costco regions locations continues to go according to plan. Selling through Costco and other potential outlets remains a small niche relative to its flagship mail-order platform, but the brand exposure and access to new customers make this a great move for Blue Apron. Yruma actually has a neutral rating on the stock, but pointing out that the Blue Apron has gotten over the initial operational issues at the fulfillment center it opened last year and arguing that the stock's valuation seems reasonable seem like bullish arguments for a sector weight rating.
The next big test will come on Aug. 2 when Blue Apron reports its second-quarter results. The stock moved sharply higher last time out despite posting a 20% decline in revenue. Bulls will argue that it's a good sign heading into a quarter in which analysts are targeting a similar 21% year-over-year drop on the top line, but the stock is trading a lot higher now. The market expectations are understandably heightened at this point. Investors will be looking for either the subscriber count to stabilize near the 786,000 it was servicing at the end of March or for average revenue per customer to keep rising. It's going to be a busy two weeks of trading activity until we hear from Blue Apron again.
