Shares of Blue Apron (NYSE:APRN) recently tumbled after the meal kit maker reported its second quarter numbers. Its revenue fell 25% annually to $179.6 million, missing estimates by $9 million and marking the company's steepest sales decline since its IPO.

Blue Apron's net loss widened from $31.6 million to $32.8 million, but narrowed on an EPS basis from $0.47 to $0.17 thanks to an increase in outstanding shares and beat expectations by a penny.

A businessman watches a plunging stock chart.

Image source: Getty Images.

These numbers look bleak, but investors should always take contrarian look at beaten-down stocks. Let's examine the pros and cons from Blue Apron's report to see if investors should sell or buy this stock at an 80% discount to its IPO price.

Examining the key numbers

   

YOY change

Total customers

717,000

(24%)

Total orders

3.12 million

(22.6%)

Average orders per customer

4.4

2.3%

Average order value

$57.34

(2.5%)

Average revenue per customer

$250

(0.4%)

Source: Blue Apron Q2 report.

Blue Apron blames its customer declines on a "transition period" during which the company is prioritizing "operational stability to build the foundation for future growth." In other words, it's focusing on stabilizing its existing customer base and revenues per customer instead of aggressively expanding.

That strategy, which included hundreds of layoffs last year, cut Blue Apron's operating expenses by 21% annually to $210.5 million. That's how it reduced its adjusted EBITDA loss from $23.9 million a year ago to $17.5 million.

What management thinks

During the conference call, Blue Apron CEO Brad Dickerson admitted that "attracting new customers efficiently is an area we must improve." Dickerson also stated: "While we have been successful in driving customers to our platform, we must improve the rates at which they convert to pay subscribers."

Blue Apron's Hoisin Tacos.

Image source: Blue Apron.

Dickerson believes that strengthening Blue Apron's fulfillment operations, expanding its menu, securing more partnerships, and building better delivery and digital experiences will lock in more customers. He also claimed that Blue Apron could achieve "double-digit revenue growth with breakeven adjusted EBITDA" in 2019, but didn't offer compelling ways for Blue Apron to counter its growing number of competitors in the meal kit space.

Dickerson highlighted Blue Apron's pilot program with Costco (NASDAQ:COST), which was initially announced in May, as a way to widen its moat in the retail market against rivals like Amazon's Whole Foods, Walmart, Kroger's Home Chef, and Albertsons' Plated.

Blue Apron's meal kits are now available at around 80 Costco locations, but Costco also sells meal kits from other companies. Moreover, Costco sells Blue Apron meal kits at a near-30% discount (per serving) to Blue Apron's subscription kits -- which could discourage customers from signing up for Blue Apron's delivery services.

The best case scenario for Blue Apron

Despite its ongoing cost-cutting efforts, Blue Apron still burned through $47.7 million in cash and equivalents during the first half of the year, and ended the period with $180.8 million in cash and equivalents.

It's hard to see how Blue Apron can expand its logistics, add more menu items, and improve its marketing while tightening its spending -- especially when competitors like Amazon, Walmart, and Kroger can sell meal kits as loss-leading items to attract more customers.

At this point, the best case scenario for Blue Apron is still a buyout. The company has a low market cap of $400 million and trades at about 0.6 times this year's sales. Unfortunately, potential suitors might realize that it's cheaper to simply launch a new meal kit brand.

The verdict: Avoid Blue Apron (for now)

Blue Apron's stock might be bottoming out, but I don't see how the company can break out of its rut. It might rally on some buyout buzz, but I won't touch this stock until more of its core metrics start moving in the right direction.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.