Direct-to-consumer platform operator Blue Apron Holdings, Inc. (APRN) in New York City has made several advances toward realizing its vision of “better living through better food.” Its shares have soared 54.8% in price over the past month to close yesterday’s trading session at $6.02, due partly to its recent announcement that it will scrap its dual-class capital structure and raise $45 million in a fully backstopped equity rights offering. However, its co-founder and chairman, Matthew Salzberg, resigned from the board this month.

In addition, APRN’s shares have declined 21.3% over the past six months and 5.4% over the past nine months. And though the demand for its products and services surged amid the COVID-19 pandemic, it continues to struggle as several restaurants reopen.

According to a Grocery Dive report, the meal kit market’s growth rate will decline from roughly 70% in 2020 to 18.2% this year. Furthermore, APRN faces intense competition from other top players in the industry, such as Germany-based HelloFresh SE. So, APRN’s near-term prospects look uncertain.

Here’s what could influence APRN’s performance in the upcoming months:

Positive Developments

On September 13, APRN introduced its first-ever prepared, single-serving meal offering—Heat & Eat. Last month, the company partnered with Chef Sam Kass to bring his flexible and non-prescriptive cooking approach to kitchens around the country. In addition, it launched its  Blue Apron x Chef Sam Kass menu that features high-quality ingredients and customizable recipes crafted for adaptability and balance. APRN also launched Pass the Love boxes in July 2021, in collaboration with Partnership for a Healthier America (PHA), to help make home cooking more accessible.

Weak Financials

APRN’s net revenue declined 5.4% year-over-year to $124.01 million for the second quarter, ended June 30, 2021. According to the company’s management, this decline occurred because “the year-ago quarter reflected the most significant demand from the pandemic.” As a result, its total orders declined 8.1% year-over-year to 1.98 million. In addition, its net loss came in at $18.59 million, versus $1.11 million in  net income in the year-ago period. Also, its loss per share was  $0.98 compared to an $0.08 EPS in the prior-year quarter.

Poor Profitability

In terms of trailing-12-month EBITDA margin, APRN’s negative value compares with a  12.72% industry average. Likewise, the stock’s trailing-12-month net income margin is negative compared to a 6.29% industry average. In addition, its trailing-12-month ROCE, ROTC, and ROTA are negative, versus  to 17.66%, 7.56%, and 6.21% respective industry averages.

POWR Ratings Don’t Indicate Enough Upside

APRN has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. APRN has a C grade for Momentum, which is in sync with its 21.3% loss over the past six months and 3.2% loss over the past year.

The stock has a C grade for Growth, consistent with analysts’ expectations that its EPS will be negative in its fiscal year 2021 and 2022. Furthermore, APRN’s EPS is expected to decline at a 28% rate per annum over the next five years. In addition, it has a D grade for Stability.

Beyond what I have stated above, we have also given APRN grades for Value, Sentiment, and Quality. Get all the APRN ratings here.

APRN is ranked #31 of 76 stocks in the Internet industry.

Bottom Line

APRN expanded its product offerings in the second quarter, including Butcher Bundles, Add-ons, and Craft Burger. However, law firm Labaton Sucharow recently launched an investigation into the company on possible securities violations and breach of fiduciary duty. Furthermore, its EPS is expected to remain negative in the coming quarters. So, it could be wise to wait before adding the stock to one’s portfolio.

How Does Blue Apron Holdings (APRN) Stack Up Against its Peers?

While APRN has an overall POWR Rating of C, one  could check out the following stocks in the same industry with an A (Strong Buy) or B (Buy) rating: Travelzoo (TZOO), Yelp Inc. (YELP), and Alphabet Inc. (GOOGL).

APRN shares rose $0.23 (+3.82%) in premarket trading Friday. Year-to-date, APRN has gained 7.33%, versus a 19.01% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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