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Stock Analysis & Ideas

Blue Apron: Bearish on Lower Post-Pandemic Demand

Blue Apron (APRN) delivers gourmet meal kits through the mail, which became widely popular during pandemic lockdowns.

Although post-pandemic normalization has occurred for stay-at-home services, Blue Apron and Hello Fresh (OTC: HLFFF) are still experiencing popularity and growth. Consumers find the meal kits beneficial in offsetting weekly grocery store costs.

Blue Apron reported a decrease in revenues and an increase in net loss for Q4 2021. The poor financial performance along with high overall market volatility caused the stock price to drop significantly.

For now, I rate the company as bearish.

Q4 2021 Financial Results

Blue Apron reported revenues of $107 million, representing a decrease of 7.3% from previous year’s same quarter. The results still show better performance than pre-pandemic operations, representing a 13% increase from Q4 2019.

The decrease in revenues was caused by lower demand due to post-pandemic circumstances. Now that people can leave their homes, they do not need meal kits delivered through the mail.

During Q4, Blue Apron focused on growth with an 68% increase in costs for marketing, amounting to $21 million. The company aims to expand brand awareness, increase marketing infrastructure, and have more efficient customer targeting.

The costs of marketing, although strategic for the company, caused it to report a net loss of $26.4 million. The company expects revenues to grow between 10% and 15% over the next fiscal year.

The company raised $78 million in equity during Q4. It currently reports $82 million in cash and short-term investments. The company has negative cash flow of $22.6 million, although long-term assets outweigh liabilities.

Blue Apron consistently reports high margins and it plans to continue using its profits to increase marketability for the company.

Blue Apron claims that average order value, orders per customer, and revenue per customer remain at all-time highs and surpass pre pandemic numbers.

Blue Apron reports sending 1.6 million orders during Q4, which is less than previous quarters going back to 2019. The company served 336,000 customers during Q4, which is slightly less than previous quarters.

Bearish Rating

Although the company forecasts better growth for 2022, it is difficult to tell whether the greater market volatility will be patient for better financial results.

The company’s stock price is down 11.5% over the last `12 months. The disappointing Q4 earnings reports caused the stock price to drop significantly.

Wall Street’s Take

Turning to Wall Street, Blue Apron has a Moderate Buy rating based on one Buy rating in the last three months. The average Blue Apron price target of $12 implies a 108.3% potential.

Conclusion

Blue Apron boasts high profit margins and a business model that saw high demand during the lockdowns.

The company reported disappointing Q4 2021 results, which show a decrease in demand for its services in the post-pandemic atmosphere.

The overall stock market is experiencing high volatility and Blue Apron’s financial reports did not impress investors. The company’s stock suffered a significant downtrend, and I rate the company as bearish for now.

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