Notwithstanding the abysmal showing by Blue Apron Holdings Inc APRN's stock since its listing on June 29 and the mixed quarterly results from the company, RBC Capital Markets and Canaccord Genuity analysts still have appetite for the shares of the company.
RBC Capital Markets maintains its Outperform rating on the shares of Blue Apron but lowered its price target from $10 to $8. At the same time, Canaccord Genuity also maintains its Buy rating, while lowering the price target from $14 to $11.
At the time of writing, Blue Apron's shares were down a moderate 0.78 percent to $5.10.
Execution Challenges Seen At Blue Apron
RBC Capital Market's Mark Mahaney noted that the company reported a modest second-quarter beat, with modest revenue upside and in-line EBITDA. However, the company lowered its future growth estimates due to execution challenges, the analyst said (see his track record here).
Mahaney continues to believe in the large total addressable market and Blue Apron's leadership position. However, the analyst expects the growth re-acceleration to come later than expected.
RBC Capital Markets, however, said its core investment thesis remains intact:
- Large addressable market opportunity, with the capability of expansion through product, service and price innovations.
- The company being the leader in the meal-kit industry based on revenue, customers and brand awareness.
- Offering attractive value proposition to consumers.
- Belief that unit economics can work out.
- Current marketing, product and distribution strategy leading to a recovery to 20 percent revenue growth in 2018.
However, the firm said the current multiple at which Blue Apron is trading implies deep skepticism regarding this growth recovery.
See also: 2 Reasons This Isn't The Time To Invest In Blue Apron
Robust Growth Likely Over Time
Meanwhile, Canaccord Genuity's Michael Graham made note of the slight revenue and EBITDA beats but also pointed to the sequential loss of 93,000 customers, primarily due to a cascade effect from a delay in scaling volume at its new Linden, New Jersey, fulfillment center.
The analyst also noted that the company's second-half revenue and EBITDA guidance was significantly lower.
To account for the slower customer growth, the analyst lowered his revenue and EBITDA estimates.
"While this significant dislocation to the growth story so soon after the IPO is disappointing and will cause skepticism regarding execution abilities going forward, we view this development as decidedly temporary, and are encouraged by the better customer engagement metrics," Canaccord Genuity said (see Graham's track record here).
The firm expects stock upside in the short term to be limited until the company provides evidence of better execution, but still expects robust growth over time.
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