At the beginning of 2020, Blue Apron's (APRN +0.00%) days seemed numbered. The meal kit maker was experiencing double-digit declines in customers and revenue, it remained deeply unprofitable, and it faced a growing number of aggressive competitors.
But then the pandemic hit. After declining for more than two straight years, Blue Apron's revenue started to rise again as more people stayed at home and ordered meal kits. Investors noticed those improvements, and the company's stock stabilized and has risen about 15% over the past 12 months. Could Blue Apron's beaten-down stock finally be worth buying again?
Image source: Getty Images.
Blue Apron's pandemic-era growth
Blue Apron's revenue plunged 32% in 2019, but rose 1% to $460.6 million in 2020. Its revenue grew 9% year-over-year to $253.7 million in the first half of 2021.
That recovery looks promising, but we can also see the pandemic-related tailwinds fading away if we break down its quarterly results:
|
Metric |
Q1 2020 (YOY Growth) |
Q2 2020 (YOY Growth) |
Q3 2020 (YOY Growth) |
Q4 2020 (YOY Growth) |
Q1 2021 (YOY Growth) |
Q2 2021 (YOY Growth) |
|---|---|---|---|---|---|---|
|
Customers |
(32%) |
(12%) |
(8%) |
1% |
4% |
(5%) |
|
Orders |
(29%) |
5% |
11% |
16% |
19% |
(8%) |
|
Revenue |
(28%) |
10% |
13% |
22% |
27% |
(5%) |
YOY = Year-over-year. Data source: Blue Apron.
We can also see how Blue Apron CEO Linda Findley, who took the helm in April 2019, focused on boosting the company's total number of orders to offset its ongoing loss of customers. Instead of trying to aggressively expand Blue Apron's customer base with expensive marketing campaigns, Findley initially focused on retaining the platform's higher-value customers.
Those cost-cutting efforts enabled Blue Apron to narrow its GAAP net loss from $61.1 million in 2019 to $46.2 million in 2020. It also narrowed its adjusted EBITDA loss from $8.4 million to $1.0 million.
But in the first half of 2021, Blue Apron's net loss widened year-over-year from $19.0 million to $34.3 million. It also posted an adjusted EBITDA loss of $9.6 million, compared to a positive adjusted EBITDA of $5.3 million a year ago. It attributed those widening losses to higher logistics costs and food inflation, and it expects those expenses to stabilize in the second half of the year.
However, Blue Apron also expects to ramp up its marketing spending again throughout the rest of the year. That's why it raised $21.1 million in cash with a stock offering back in June, then announced another $78 million capital raise -- which mainly includes warrants for purchasing additional shares over the next seven years -- in September.
Blue Apron clearly needs to strengthen its balance sheet. It ended last quarter with $51 million in cash and equivalents, but it had a negative free cash flow of $13.9 million for the first six months and was still shouldering $32.4 million in total debt (including $3.5 million in short-term debt and $28.9 million in long-term debt).
Blue Apron's post-pandemic guidance
Blue Apron could face tough year-over-year comparisons in the second half of 2021 as the pandemic-related tailwinds fade away. But for the full year, the company still expects to generate "single-digit to low double-digit" revenue growth with accelerating growth in the second half. It also expects to post its first full-year positive adjusted EBITDA in 2022.
Those expectations seem overly optimistic to me, but Blue Apron expects its growth trends throughout the pandemic to carry on after the crisis ends, even though it suffered a "seasonal" year-over-year slowdown in the second quarter.
Faster-growing rival HelloFresh (HLFF.F +5.88%) also raised its full-year revenue growth guidance from 25%-35% to 35%-45% in August. That confident forecast seems to support Blue Apron's bullish expectations.
Is Blue Apron an undervalued stock?
Is Blue Apron undervalued? It depends on how things go.
Analysts expect Blue Apron's revenue to rise 8% to $497.7 million this year. Based on that forecast, its stock trades at just 0.4 times this year's sales. By comparison, HelloFresh trades at 2.3 times this year's sales.
Last November, I told investors that Blue Apron's stock could recover if it continued to stabilize its business. The stock has risen about 60% since then, and I believe it could still have room to run if it continues to streamline its business, focus on higher-value customers, and roll out new products.
However, investors should probably wait for Blue Apron to report its third-quarter earnings in early November -- which should either support or contradict its rosy expectations for the rest of 2021 -- before starting a new position.
