Blue Apron Holdings Inc (NYSE:APRN) has had a disastrous year. In fact, if analysts gave out an award for the worst IPO for 2017, APRN stock would be a front-runner.

Since June, Blue Apron stock has sunk like a stone, plunging from $10 to just $3 now. In November alone, the APRN stock price is down almost 40% following a dismal earnings report.

At this point, it’d be easy to throw in the towel. But after a 70% decline in just a few months, the next direction for APRN stock might be up, at least in the short-term.

Short sellers have plagued APRN stock, leaving themselves vulnerable for a squeeze. And a grocery store’s purchase of competitor Plated confirmed the value of Blue Apron’s business model. That said, the bears have plenty of good arguments too – namely that there are too many competitors and profit margins are too low to ever make this operation viable.

APRN Stock Cons

Broken Business Model: Blue Apron doesn’t charge high enough prices to make a profit. Full stop.

In its most recent quarter, Blue Apron sold $211 million in meal kits, and the costs of doing so, such as fresh ingredients and shipping alone cost $164 million. Throw in marketing costs, and the company already spent all its revenues.

Put simply, you don’t have a functional business when it costs you a dollar to produce your product and advertise it in order to achieve a dollar of sales. It leaves absolutely no money for salaries, a research budget or money to pay rent for your office space, to say nothing of profits.

Blue Apron’s corporate overhead for things such as salaries and technology costs added up to $66 million for the quarter, leaving the company with a massive $87 million loss on just $211 million of sales.

Dubious Growth: When a company loses tons of money proportionally to its revenues, the common excuse analysts make is that the business needs to scale. Blue Apron isn’t scaling though.

In fact, Blue Apron is hardly growing. Between Q3 2016 and Q3 2017, revenues grew by just $6 million to $211 million. When you’re losing almost $100 million a quarter, a $6 million increase in top-line revenue does nothing to move the needle.

Even worse, the company’s profit margin actually fell further into the red. The company managed to spend an extra $50 million in costs to achieve just $6 million in additional revenue. What’s going wrong?

One hypothesis is that the company is being forced to discount heavily to even maintain stable revenues. Look at the company’s discount offers, such as 20% on gift cards at Costco Wholesale Corporation (NASDAQ:COST) stores, or up to 35% off via Groupon Inc (NASDAQ:GRPN).

Given that they already lose money on all their sales, the discounted product must burn through cash especially quickly.

Too Much Competition: This sort of aggressive promotional activity would make sense if Blue Apron could establish a steady growing business. But judging by their nearly flat year-over-year revenue, customer churn must be prolific.

Blue Apron is spending tens of millions a quarter to attract new customers, but the newly-attracted customers aren’t sticking around long.

A large part of that is due to the furious competition within the industry. A Wall Street Journal article estimated that there are currently around 100 meal-kit services out there.

Blue Apron already charges $9-$10 per meal and loses scads of money at that price point. How can they possibly raise prices to a profitable level with a seemingly unlimited number of potential rivals waiting to undercut them?

APRN Stock Pros

Sentiment Is Horrible: The last six articles here at InvestorPlace about Blue Apron have all been uniformly negative. Titles include such headlines as “Recipe For Disaster” and “Stockholder Starvation.” And their analysis is correct, there’s plenty to hate about APRN stock here.

But sometimes excessive negativity can become its own catalyst. Oftentimes, the most profitable trades are the most contrarian ones. APRN stock is down almost 40% on the month and 70% since the IPO. The stock has been oversold pretty much continuously from the IPO onward.

At this point, a sign of life, any at all, could cause the stock to roar back to $5. The company has aggressively shed employees and refocused its marketing spend. Perhaps these initiatives will work; even a flicker of a turnaround could spice up APRN stock in a hurry.

Short Sellers Are Primed To Get Squeezed: APRN stock is currently the eighth most shorted stock in the country. And that short interest has held steady around 48% of the total Blue Apron float. That despite the price of APRN stock plunging in recent weeks.

Even if bears are right that Blue Apron is ultimately going to zero, it’s risky to leave such a huge short position open as the price plummets. Remember, short sellers can only make $3/share in profits before the stock gets to zero, whereas the stock could double, and it only would be back to where it was in mid-September.

That is to say that potential upside for APRN stock is potentially huge if the company’s turnaround efforts work. Short sellers are running a big risk maintaining a massive short position here after such a powerful prolonged decline.

Albertsons Buys a Key Competitor: Privately-held grocery store chain Albertsons recently acquired Plated for $300 million. The WSJ article that I previously mentioned stated that Plated is in 4th place in the market.

Though financial details weren’t disclosed, it appears Plated sold for at least 1x sales, suggesting that Blue Apron, as the industry leader, is quite cheap by comparison at 0.6x sales. In theory, APRN stock should trade closer to $5 instead of $3 based on the price Albertsons paid for a key rival.

That said, it’s not all good news. Following the Albertsons buyout, Plated co-founder Nick Taranto said: “We are playing for billions here. We are going to kill Blue Apron, we are going to take on Amazon Fresh. This partnership enables us to become a $10 billion brand in a matter of years.”

It’s good that grocery stores want to buy meal kit players. But it doesn’t necessarily mean Blue Apron will get its own buyout bid.

Verdict on APRN Stock

As a natural contrarian, I’d love to bless APRN stock here while the whole market hates it. But I can’t do it. In this case, the bears have the better arguments.

You can go long APRN as a $3 lottery ticket. With the huge short position and dreadful sentiment, I wouldn’t be shocked to see the stock rip higher in the short term. By next year, however, I expect Blue Apron to continue sinking further into penny stock land.

At the time of this writing, the author held no positions in any of the aforementioned securities. You can reach him on Twitter at @irbezek.