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In Focus: Blue Apron

Thanks for checking out this week's In Focus, our look into stocks and markets that made Wall Street's news cycle over the past week.

We hope everyone had a good holiday and please have a safe and Happy New Year.

This week we look at Blue Apron (APRN), a company that had a bright future for all of a minute, but that didn't that didn't deter them from going public.

Future Seemed so Bright

Founded in 2012 the company went public in June 2017. The road to becoming a publicly traded company was a bumpy one. Initially Blue Apron intended to offer 30 million shares at $15 - $17 per share, but Amazon, who had a small meal prep business of their own had announced it's plan to purchase Whole Foods. The news of an Amazon-Whole Foods deal concerned Blue Apron investors, and Blue Apron share's were offered at $10 per share, instead of the $15 per share the company had hoped for.

Source: Yahoo Finance Blue Apron Chart

Source: Yahoo Finance

Since the IPO it's been a steady decline down, and at the beginning of last week the stock was trading under $1 per share. As it appeared all hope was lost and the company was headed towards being delisted from the New York Stock Exchange the company signed a deal with Weight Watchers (WTW).

Source: Blue Apron Q3 Earnings Report

Source: Blue Apron Q3 Earnings Report

As a market participant I often see deals that are done for the sake of doing a deal, but this deal makes sense for all involved. From Blue Apron's Q3 earnings release, we see that orders, customers, average order value, and average revenue per customer have declined sine Q3 2017.

Source: Weight Watchers Quarterly Earnings

Source: Weight Watchers Q3 2018 Earnings Report

A snippet of Weight Watchers Q3 2018 presentation shows a company heading in the right direction with subscriber growth, revenue growth and all time high retention rates. At the end of Q3 2018 Weight Watchers boasted 11 consecutive months of subscriber growth and 10 consecutive months of revenue growth.

Customer Growth Over Everything

I was always weary of Blue Apron's business model, I wasn't sold on a stand alone meal prep company being successful without something else attached. I also don't believe in the acquire customers at all cost and worry about profits later business model. Because it worked for Bezos and company, doesn't mean it will work for you or Blue Apron in this case.

The Blue Apron CEO Brad Dickerson believes the Weight Watchers deal will help reverse the decline in customers and make 2019 a profitable year for Blue Apron. If the Blue Apron can show signs of profitability in 2019 it could build investors confidence. Right now it's about the little guy, with the stock price being so low many institutions are restricted from purchasing the stock.

Fail, Tweak, Succeed in Public

If you believe that the Weight Watchers deal will have a significant impact on the company then this is the time to get involved. I believe it will and I would rate (APRN) a speculative BUY.

Typically I would love for a company like Blue Apron to really have it all together before going public, but this is a new era. Now people and companies get their ideas and products out to the public and work on them in public, no one is waiting for perfect or anything close to it before going public with an idea anymore. This is what we are seeing with Blue Apron. If you're comfortable investing in an unfinished product then Blue Apron may be for you. If you need more of a track record, then you'll have to wait until April 2019 to get the Q1 2019 numbers.

This is where I leave you, with a Buy recommendation on a company and its penny stock that a week ago was close to being delisted. Hey, Microsoft (MSFT) once traded under a dollar per share.


What is the Seville Report

The Seville Report is our attempt to bring world class investment research to people who feel world class investment research isn't available to them. We also want to demystify the stock market for people who wouldn't think of putting their money in the stock market. Our research comes quarterly via our newsletter, The Seville Report. We use the website and this blog to share thoughts and ideas about the markets and different companies.

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