Blue Apron Holdings (NYSE:APRN) shares are continuing their wild ride ever since first surging over 9% last Thursday on back of a strong first quarter print. Today, the stock has vaulted close to 34% in value. Wall Street is shining a lot of enthusiasm on the meal-kit maker in the heat of earnings season.
Oppenheimer analyst Rupesh Parikh joins the conversation from the sidelines on the heels of a tour through the company’s Linden, NJ fulfilment center and meeting with the management team. After an encouraging chat with CEO Brad Dickerson as well as the impressive quarterly print that has riled up investor conviction, a retail alliance with COST, and takeaways from the generation fulfillment center, the analyst has come away with greater optimism on the company’s value creation potential down the line.
That said, the analyst reiterates a Perform rating on APRN stock without listing a price target (To watch Parikh’s track record, click here)
The key takeaways for Parikh on this meal-kit maker’s narrative after the tour are as follows: “1) The automation and expertise appear to be best-in-class and key differentiators vs. peers; 2) Management continues to see an attractive runway to drive efficiencies at all DCs; 3) Multi-channel opportunity holds significant promise; 4) Product innovation such as special occasion offerings/ grill menus could represent new revenue drivers; 5) Retail expansion should be EBITDA accretive; and 6) The company seems to be on a much more stable footing following challenges last summer. As we look forward, we are closely watching management’s ability to return to top-line growth in the back half of the year coupled with progress toward break-even EBITDA in FY19. We believe the ability to achieve these two goals could significantly change the narrative on the APRN story from here. At this point, we are more confident in APRN’s ability to hit expense targets, but remain uncertain on the ability to drive double-digit revenue growth.”
Top analyst Youssef Squali at SunTrust echoes from the sidelines, noting that “positive 1Q18 results show early signs of turnaround.”
However, largely due to a weaker guide set for the back half of 2018 that underwhelmed the Street’s expectations, the analyst maintains a Hold rating on APRN stock while cutting the price target from $4.50 to $2.70. Notably, this implies a close to 4% downside from current levels.
Regarding margins, Squali wagers “much of this improvement is sustainable, which could set up the company to achieve a break-even adj. EBITDA by year end,” who recognizes APRN’s fulfillment centers are gaining ground on “becoming more operationally efficient” – especially the Linden facility.
Bottom line, “A combination of muted top line expectations and better cost containment helped APRN beat Street estimates for 1Q18. Mixed 2Q18 guidance and FY18 outlook show a steady but slow progress towards growth and Adj. EBITDA break-even late 2018/early 2019, and FCF profitability sometime in FY20. The re-ignition of its marketing push is a strong indication that the backend infrastructure has been strengthened and efficiencies improved, and the launch of a pilot with Costco speaks to APRN’s strong value proposition within a crowded meal kit segment,” contends the analyst.
Youssef Squali has a very good TipRanks score with a 72% success rate and a high ranking of #53 out of 4,787 analysts. Squali yields 20.6% in his annual returns. However, when recommending APRN, Squali forfeits 30.9% in average profits on the stock.
TipRanks showcases caution with positivity baked into expectations when it comes to Wall Street’s majority opinion on this consumer player. Out of 7 analysts polled in the last 3 months, 1 is bullish on APRN stock while 6 remain sidelined. With a solid return potential of nearly 57%, the stock’s consensus target price stands tall at $4.34.