Blue Apron Holdings Inc (NYSE:APRN) delivered a solid fourth quarter print yesterday for 2017, leaving a cautiously optimistic analyst with room to get a little more positive on a comeback narrative.
Though APRN beat out conservative Street-wide expectations for the quarter, top analyst Youssef Squali at SunTrust is increasingly confident, but believes the turnaround will need time to come to life.
As such, the analyst reiterates a Hold rating on APRN stock while bumping up the price target from $4 to $4.50, which implies a 34% upside from current levels.
Squali writes, “A combination of lowered top line expectations and better cost containment helped APRN beat muted consensus estimates for 4Q17. That said, FY18 turnaround is expected to be back-end loaded, and predicated on a successful marketing push in a more crowded meal kit segment. Beyond brand and scale, APRN now looks to successfully compete on breadth and flexibility around product offerings, which we believe is astute, but likely to take time to materialize.” All the same, “We’re biased more positively towards APRN,” Squali argues after the company’s print shot past “muted” forecasts.
For the fourth quarter, APRN posted $187.7 million in revenue and ($19.7 million) in adjusted EBITDA, soaring past the Street’s estimates of $184.8 million in revenue and ($25.4 million) in adjusted EBITDA.
“Street estimates were light due to the company’s announced pullback in marketing spend for the seasonally weak quarter, as APRN focused on improving operating efficiency at its new Linden facility. Signs of improvement were apparent enough towards the end of the quarter that management decided to re-ignite marketing spend in the last week of December, to help bring on new customers and further engage existing ones in 1Q18,” notes the analyst.
With marketing taking “renewed” priority, and APRN rising out of the struggles of two troublesome quarters, backend infrastructure is starting to see hints of stability- particularly at the new Linden facility, Squali argues. Marketing initiatives firing off are important as rivals HelloFresh and Plated try to boost brand and positioning. It may be in the early days of the APRN team’s marketing push, but Squali highlights this as a savvy play. Beginning in the first quarter of 2018, the analyst angles to see improved impacts of improved spend on customer acquisition as well as retention- even as he braces for some “very tough” year-over-year comps.
Squali concludes noting that gross margin recovery experienced in the fourth quarter should be “sustainable” into the new year, with the APRN management team guiding to an improved 32% to 33% gross margin for full-year 2018.
Youssef Squali has a very good TipRanks score with a 69% success rate and a high ranking of #52 out of 4,737 analysts. Squali garners 19.1% in his yearly returns. However, when recommending APRN, Squali forfeits 30.9% in average profits on the stock.
TipRanks highlights a cautious analyst consensus surveying APRN stock’s opportunity. Out of 7 analysts polled in the last 3 months, only 1 is bullish on APRN stock while 6 are playing it safe on the sidelines. However, based on these analysts’ expectations, it appears some optimism is baked into the apprehension. With a healthy return potential of 53%, the stock’s consensus target price stands at $5.13.