Blue Apron: Challenges Will Eventually Give Way To Opportunity

Blue Apron Holdings Inc (NYSE: APRN) management is confident it can overcome its short-term challenges and co-exist with Amazon.com, Inc. (NASDAQ: AMZN).

The meal delivery service has delivered one of the most disappointing IPOs of 2017.

Since hitting the market in late June, shares have declined over 43 percent.

The company was a prime victim of the Amazon effect after the e-commerce giant announced its own meal kit service shortly following Blue Apron's IPO, but things may be turning around.

Blue Apron is currently in the process of a transformational product expansion that Canaccord Genuity analyst Michael Graham believes will significantly improve engagement, order frequency and retention.

“We believe increased customer options should lead to a stickier customer base with improved revenue and margin per customer,” said Graham.

The plan is to expand from six recipes to choose from to eight recipes to choose from per week, offer unlimited configuration of meals and varying levels of frequency customers can order — two to three recipes per week instead of the static three recipes currently offered.

According to Graham, it was the third step in the new product expansion where the company hit a snag, due to unforeseen complexities during a fulfillment center transition, but the analyst believes the issues plaguing Blue Apron are short term (see Graham's track record here).

“We continue to view the current headwinds as decidedly temporary, and management’s recent commentary reinforces our view that the company is working through the issues at a good pace and can largely the transition by the end of the year,” said Graham.

Canaccord Genuity maintains a Buy rating on Blue Apron with a $11 price target.

Shares of Blue Apron were up 7.71 percent at $5.80 at time of publication.

Related Link: Time To Order Some Blue Apron?