Shares of Blue Apron Holdings (NYSE:APRN) Has Once Again Become A Penny Stock
Much like other “newly minted” penny stocks, Blue Apron Holdings (APRN Stock Report) has run into some trouble and fundamental catalysts have triggered a huge sell-off in shares this week. If you remember, this company was one of the stand-out penny stocks to watch earlier this year and one that got traders excited during the early weeks of the coronavirus pandemic.
January to mid-March saw APRN stock slow bleed from over $6.60 to lows of $2.01 as nothing seemed to stick for the meal delivery company. While it’s been beleaguered by financial troubles, COVID-19 seemed to have breathed new life back into the former penny stock.
With the onset of stay-at-home orders, limited access to grocery stores, and a generally uncertain future, food delivery stocks were some of the early winners. Blue Apron stock ended up shooting up to highs of $28.84 in March giving traders an opportunity to capitalize on a move of more than 1,180%. Like most parabolic penny stocks – Kodak, Urban One, etc. – APRN stock came back down to earth in a fierce sell-off shortly after. But the difference after that happened was that shares ended up maintaining new support levels much higher than its former penny stock range.
Most of the year, APRN stock traded between $15 and $6 believe it or not. This leant itself to an attractive option for day traders to capitalize on. Needless to say, from a fundamental perspective, Blue Apron was experiencing a renaissance of sorts. For far too long the company battled with shoddy financials and, in my opinion, a general lack of vision to evolve from just a home-cooking-focused company to something bigger.
Blue Apron Deals Don’t Hold Weight For Shareholders
Blue Apron has had several chances to capitalize on the opportunities set forth. It’s deal with Weight Watchers put it center stage in an organization hungry for healthy meals. But to compete with the likes of Nutrisystem, HelloFresh (HLFFF Stock Report), and even meal kits from grocery stores like Kroger (KR Stock Report) and Walmart (WMT Stock Report), the competition is incredibly high.
Not only do grocery store chains have a built-in customer base, but the marketing behind things like Nutrisystem and HelloFresh seems to resonate better with target demographics. You might not think this would be a sticking point considering the company was able to raise roughly $37 million this summer that could have been used for boosting some of the marketing efforts for the company.
Furthermore, while the idea of home delivery is perfect for times like these, Blue Apron is still considered a “luxury” product. For those pinching pennies during hard economic times, cheaper alternatives from Walmart and Kroger likely take precedence over a Blue Apron meal kit. Meanwhile, the general focus of the company wasn’t quite clear as it battled large brick and mortar food chains as well as missing an early move toward eCommerce.
Blue Apron’s Attempt At Profitability
While all of this was going on in the background, Blue Apron remained focus on growth. In its second quarter earnings, the company reported increased customer levels and was even able to post an EPS of $0.08 compared to estimates of an EPS loss of $0.45 for the quarter. While these were better than expected, the third quarter was likely going to be a determining factor for the company. The company said it expected sales to come in around $112 million with a loss of no more than $18 million.
Again, keep in mind the capital raised in August. This ended up becoming a negative catalysts that, ultimately, APRN stock wasn’t able to recover from. Even with swapping out new directors to try and right the ship. But to no avail.
Why Is Blue Apron Stock Falling?
The most recent rug-pull came with, you guessed it, Q3 earnings results. While Blue Apron was able to beat both EPS and sales estimates, the results didn’t justify such a bullish sentiment that APRN stock had seen during months prior. We weren’t talking about profitability. This latest quarter recorded an EPS loss of 96 cents – still better than the EPS loss of $1.44 per share- but not great, all the same. Sales also had just skated by with a beat- $112.3 million compared to the $112 million estimate.
Then, management said the one thing that shareholders typically don’t enjoy hearing. Blue Apron said that its Board of Directors and management will “continue to evaluate and look for opportunities in the ordinary course to enhance shareholder value”. This strategic review began in February that helped breed some speculation on a potential merger or acquisition of the company.
With this concluded and no apparent outcome outlined, the prospects of M&A seem to be in the rear-view right now. Customer growth was non-existent for the quarter as well. The company reported 357,000 customers at the end of September 2020 compared to 396,000 at the end of June 2020. This wasn’t just down quarter-over-quarter either. Last year’s Q3 customer base totaled 386,000. Orders were also down, quarter-over-quarter. Blue Apron reported 1,917,000 orders compared to over 2 million orders in its previous quarter. Notably, year-over-year, Blue Apron saw a jump in orders, however.
Is There Any Hope For APRN Stock? Nestle Deal Could Point To Potential
This is the question for all those APRN longs out there. What’s next for Blue Apron stock? Based on the company’s outlook, there’s likely some pain left to endure. The company sees its Q4 revenue between $108 million and $112 million. Wall Street estimates thought that would be closer to $116 million in Q4. Blue Apron also expects a loss of no more than $15 million for the fourth quarter.
Looking beyond Q4, the company said that it expect “operational improvement” to help address some of its labor challenges. It also said that Blue Apron plans on boosting its marketing spend in the first quarter of next year.
Is this too little too late? Blue Apron anticipates year-over-year revenue growth and year-over-year customer growth. Given the bleak Q3 results and questionable outlook for the end of the year, will APRN stock fall further before things get better, or is it one of the penny stocks to buy now that these latest financials are out in the open? Since making its 52-week highs in March, APRN stock is down 85% (so far). With the recent acquisition of Freshly by Nestle, will that spark some reinterest in another Strategic Review?