Wall Street can't save Blue Apron's stock

Myles Udland

Shares of Blue Apron (APRN) are surging on Monday after a slew of bullish commentary from Wall Street analysts.

Shares of the meal-kit delivery company were up as much as 15% on Monday to trade above $7.50 for the first time since July 13.

Even with this pop, Blue Apron shares are down about 25% from its IPO debut price, indicating investors have not reached the same conclusions about the company being argued by analysts.

Monday’s rally came as Wall Street’s post-IPO blackout period ended, allowing firms involved in the initial offering of the company’s shares to initiate research coverage on the stock 25 days after the IPO.

Blue Apron shares popped on Monday after the company got some good news from Wall Street. (Source: Yahoo Finance)

Of the 11 firms that published new recommendations on Blue Apron, Business Insider noted that seven were either “buy” or “outperform” — in effect the most positive view a firm can have on a stock — while the remaining four were neutral.

What analysts are saying about Blue Apron

Unlike the market’s early verdict on Blue Apron, none of its Wall Street investment banking partners have an outright negative view on the company.

Analysts at RBC Capital Markets, which was an underwriter on the deal, put a $10 price target and “Outperform” rating on shares on Monday.

“Blue Apron is the leading player in the nascent meal-kit delivery market and addressing a large, multi-billion dollar market,” the firm wrote Monday. “We believe the company’s new product and service initiatives enhance its consumer value proposition and will lead to re-accelerating growth in [fiscal year 2018] and a multiple re-rating.”

(A “multiple re-rating basically” is a jargon-y way of saying that a company will be more highly valued by investors even if its underlying business does not fundamentally transform.)

Analysts at Oppenheimer, which also served as an underwriter on Blue Apron’s IPO, put an $11 price target and also pegged an “Outperform” rating on shares on Monday.

Like RBC, Oppenheimer cited Blue Apron’s large TAM, or total addressable market, as a reason for optimism on the company’s future prospects.

Oppenheimer, which calculates Blue Apron’s TAM at $524 billion, said this market “should buoy the growth of the meal kit industry, which should drive Blue Apron’s revenue growth over time.” RBC notes that the grocery market in the U.S. is about $780 billion with just 2% of this spending, or $20 billion, happening online. The firm sees growth in online grocery spending as a positive boost to Blue Apron over time.

Snapchat’s slide

Recent history, however, does not portend that Monday’s flurry of positive headlines for Blue Apron will be anything like a saving grace for the stock, which has been under pressure for all of its short time as a public company.

Back in March, firms that underwrote Snapchat parent company Snap Inc.’s (SNAP) debut rolled out their initial ratings on the stock, and were almost as universally positive across the board; only two of the ten underwriters did not slap a “Buy” or equivalent rating on the stock.

Since the March 27 end of Snap’s post-IPO quiet period, however, shares are down almost 40%. On Monday, the stock was down another 2.5% to as low as $14.11, a new all-time low for the stock. And a downgrade of Snap by analysts at Morgan Stanley — which had earlier put an “Overweight” rating on the stock — sent Snap shares down almost 9%.

Snap Inc. shares have been sliding since it got a slew of good news from Wall Street back in late March. (Source: Yahoo Finance)

Additionally, much of the pressure Blue Apron has been under since its IPO has been related to the elephant in the room of seemingly every consumer-facing business today: Amazon (AMZN).

Before Blue Apron even went public, the debut range for its stock fell after Amazon purchased Whole Foods (WFM), a move that made clear the leader in online retail was serious about moving into the food business, which they’ve struggled to master for years.

Eventually, Blue Apron went public at $10 per share, down from an initial range of $15-$17 per share sought at the beginning of its roadshow.

And then just last week, Blue Apron shares got slammed after a patent filing from Amazon indicated the company is exploring prepared food kits. In other words, Amazon will seek to become a direct competitor to Blue Apron. This news sent shares down as much as 11%.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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