Blue Apron (NYSE:APRN) shares are on the comeback trail. Following upbeat 2019 guidance earlier in January and better-than-expected results in the company's fourth-quarter earnings report, the beaten-down stock has surged, more than doubling since it hit bottom at $0.65 a share on Dec. 21, 2018.

Indeed, there are several reasons for investors to finally be enthusiastic about the stock. Management expects the company to turn an adjusted EBITDA profit for the first time in both this year and the current quarter, as the company forecast adjusted EBITDA profit of $2 million to $5 million for the first quarter. While positive adjusted EBITDA is much different than a GAAP profit, it still connotes a step in the right direction.

Meanwhile, the company said its new partnership with WW is performing better than expected and is optimistic about expanding its relationship with Jet.com. On the earnings call, the company also touted a new product called Blue Apron Knick Knacks, or flavorings like spice mixes, sauces, and other ingredients designed to be added to protein or produce that the customer buys separately, which it believes will be a good fit in brick-and-mortar stores. The new product will be launched on Jet.com tomorrow.

The fourth-quarter numbers themselves also showed progress as the company slashed its net loss by 39% to $15.4 million, and cost of goods sold margin improved 930 basis points. However, part of the reason that net loss narrowed in the quarter is that the company continued to shrink as revenue fell again, dropping 25% to $140.7 million. That's partly because of Blue Apron's strategy to work toward profitability by focusing on its best customers, but as a result of that revenue decline, other costs like marketing and product, technology, and general and administrative expenses actually increased as a percentage of a revenue.

The big question for Blue Apron, then, isn't whether the company can deliver an adjusted EBITDA profit, but if it can ever return to revenue growth.

Check out the latest Blue Apron earnings call transcript.

A collection of ingredients in a Blue Apron meal kit.

Image source: Blue Apron.

What counts

Even with an adjusted EBITDA profit, Blue Apron's hopes of building a viable long-term business are virtually impossible if revenue continues to decline. The top line fell 24.2% last year to $667.6 million. That's not necessarily cause for alarm, since the decline in sales was part of a planned cutback in marketing to focus on its best customers, which should improve profitability. 

However, Blue Apron was vague about when it would return to revenue growth, forecasting that revenue and customer count would continue to decline through 2019, and saying performance would be dependent on the success of its initiatives. Management expected average revenue per customer and orders per customers to increase in 2019, and it saw those as leading indicators of a strengthening customer base. In fact, in the fourth quarter, average revenue per customer increased on a year-over-year basis from $248 to $252, and improved sequentially from $233 in the third quarter, a sign that its strategy is starting to pay off.

On a GAAP basis, however, Blue Apron is still far from turning a profit, as it posted losses of $122.1 million last year and $23.7 million in the fourth quarter. Its free cash flow was -$91.9 million. 

In other words, though management expects its net loss to significantly improve in 2019, it's not going to dig itself out of that hole, after a -18% profit margin last year, without growing revenue. Though the company is taking steps in the right direction, the numbers show that it still has a lot of work to do.

Perhaps the best news for investors is that the stock is so cheap after falling so far that any piece of good news could keep the rally going. If Blue Apron shows signs of returning to revenue growth, it will likely be rewarded by the market.