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2 Reasons This Isn't The Time To Invest In Blue Apron

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2 Reasons This Isn't The Time To Invest In Blue Apron
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KeyBanc: Blue Apron Could Be A 'Compelling Acquisition Target'
Benzinga's Top Upgrades, Downgrades For November 20, 2017

Blue Apron Holdings Inc (NYSE: APRN), which hasn't had the smoothest of the sailing in its IPO, is seeing its shares currently trade at half of its IPO price.

In early trading Friday, Blue Apron shares were down 1.56 percent at $5.06.

Reviewing the second-quarter results, Barclays flagged two primary concerns when it initiated coverage of the company a few weeks ago. The firm now said it sees these two issues are impacting the company's financial performance in 2017.

Analysts Ross Sandler and Deepak Mathivanan indicated that the concerns were:

  • Eroding unit economics.
  • Increasing competition.

The analysts maintained their Equal-Weight rating on the company's shares but lowered their price target from $7 to $5.

See also: Digesting Meal-Kit Service Offerings Ahead Of Blue Apron's IPO

However, the analysts pointed to some positives from Blue Apron's second-quarter earnings report, including the progress in diversifying its products and offering greater selection and quantities. This, according to the analysts, might help in retention.

Barclays noted that the second-quarter revenues came in 1 percent ahead of the consensus estimates and the adjusted loss was also slightly narrower than expected. A planned decision to align marketing spend with the slowing revenue growth and appropriately manage the roll out of its expanded product offerings helped the company leverage its marketing as a percent of revenues by 140 basis points to 14.5 percent, the firm said.

However, the firm noted that the company guided second-half revenues below its previous guidance, as challenges from the on-boarding of the new Linden FC and complexity in product expansion initiatives hurt overall unit economics.

Additionally, the firm noted that contribution profit per order, a key metric, fell 21 percent in the second quarter, with the guidance assuming further declines in the second-half. The firm also noted a 560 basis point deleveraging in the cost of goods sold and a 9 percent sequential decline in total customers, as the company shrank its marketing spend.

Barclays believes the operational challenges at Blue Apron is impacting unit economics and growth. Accordingly, the firm meaningfully reduced its 2017 and 2018 EBITDA estimates for the company.

The firm said it remains on the sidelines until it sees stabilization, which it believes would not be likely until 2018.

Latest Ratings for APRN

DateFirmActionFromTo
Nov 2017KeyBancInitiates Coverage OnSector Weight
Nov 2017Canaccord GenuityMaintainsBuy
Nov 2017BarclaysDowngradesEqual-WeightUnderweight

View More Analyst Ratings for APRN
View the Latest Analyst Ratings

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