Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Blue Apron Stock Slipped Today

By Jeremy Bowman - Updated Apr 20, 2019 at 12:20AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the meal-kit service dove today on a correction after Tuesday's jump.

What happened

Shares of Blue Apron ( APRN -3.07% ) were sliding today though there was no direct news driving the stock lower. What seemed to prompt the sell-off was increasing concerns about the company's financial position, even after it said it would turn a profit on an adjusted EBITDA basis in the first quarter of this year and for the full year. The stock was trading flat this morning but then suddenly plunged after an article in InvestorPlace listed it as one of seven stocks that could go bankrupt this year.

That possibility seemed to rattle investors and sparked a correction just two days after the stock surged nearly 50% on updated guidance calling for adjusted EBITDA profits. Today, the stock closed down 10.5% after falling as much as 16.1% earlier in the session.

A woman looks at a computer while she cooks.

Image source: Getty Images.

So what 

Writing in InvestorPlace, Bret Kenwell argued that Blue Apron was facing too much competition and its margins are too low for the company to survive over the long term. Beyond that, there are other reasons to question Blue Apron's ability to bounce back and explain why the stock deserved a correction after Tuesday's surge. 

As my colleague Tim Green argued, using adjusted EBITDA as a measure of profitability significantly manipulates the company's underlying numbers and performance and may even push management to focus on the wrong goals, such as an over reliance on share-based compensation since that doesn't subtract from adjusted EBITDA.

Now what  

While the company's guidance is clearly a good sign as are the better-than-expected results from its new partnership with WW, formerly known as Weight Watchers, it's still an open question of whether Blue Apron can be successful over the long term. Customers are fleeing the service, as revenue has plunged in 2018.

Part of new CEO Brad Dickerson's focus on adjusted EBITDA dovetails with his decision to build the business around the company's best customers, meaning revenue could continue to decline this year as the company spends less to acquire new customers. That's a bad sign, as even a profitable company with sliding revenue is only going to warrant a very low valuation. Given that, the stock's volatility will continue as investors debate the company's turnaround potential.

Check out the latest Blue Apron earnings call transcript.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Blue Apron Stock Quote
Blue Apron
$11.36 (-3.07%) $0.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.