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Blue Apron Holdings Inc Stock Feeds Investors Only Dead Cat

The earnings beat does not address the lack of a moat that will ultimately dooms APRN stock

By Will Healy, InvestorPlace Contributor

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Blue Apron Holdings Inc (APRN) Stock Is Both Too Large and Too Small

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Blue Apron Holdings Inc (NASDAQ:APRN) moved higher following its earnings announcement. Although the company reported a loss, the loss came in lower than expected, and investors took the stock price higher.

Unfortunately, little evidence has emerged that improves Blue Apron’s dire competitive situation. Due to this competition, the hope that comes with better-than-expected earnings will bring doom to APRN stock in the end.

APRN stock beat analyst expectations

For the fourth quarter, APRN reported a loss of 20 cents per share. This beat expectations by 7 cents per share. Revenue came in at $187.7million. This beat estimates by $2.56 million. It also represents a 13% year-over-year decline.

For all of 2017, revenue saw improvement rising to $881.2 million, up from $795.4 in 2016. Net losses for 2017 came in at $1.64 per share, down from an 84-cents per share loss the previous year.

Shares spiked up to 23% following the announcement, but has since returned to pre-earnings levels. When this happens, investors must ask what this means for APRN stock. Does this represent a sign of recovery in the stock or is was it just another dead cat bounce?

In a previous article, I called Blue Apron stock a “recipe for shareholder starvation.” Other than the dead cat shareholders have been fed, APRN investors have done little feasting since that time.

APRN Stock Can’t Build A Moat

Unfortunately, all positive moves the company makes come across as lipstick on a pig. Whatever APRN does, it cannot address its fundamental problem—the lack of a moat. APRN doesn’t only compete with online behemoth Amazon.com, Inc. (NASDAQ:AMZN) or direct competitor Hellofresh SE. Companies such as Kroger Co (NYSE:KR) as well as regional chains and local niche grocers all compete in this space. Walmart Inc (NYSE:WMT), Target Corporation (NYSE:TGT), Costco Wholesale Corporation (NASDAQ:COST), and many other large grocers have the needed ingredients to compete directly as well.

Also, given the $9.99 cost of a meal kit (and the requirement to buy a minimum of 6 kits), one could arguably count Chipotle Mexican Grill, Inc. (NYSE:CMG), Subway, and many other low-cost, healthy alternatives compete with Blue Apron as well. How does a comparatively tiny firm with no apparent prospects for earning a profit compete with these giants?

As our own Dana Blankenhorn suggests, perhaps the company could gain a new lease on life in a niche such as farm-to-table ingredients. That could save the company, but I doubt even that would make APRN stock investable.

Buying spurts indicate not everyone is ready to see APRN stock starve. Promoting Brad Dickerson from CFO to CEO gave the stock a short-term reprieve. It rose from the low $3s to about $4.50 per share, before falling back to $3 per share. Now with the earnings beat, the stock price moved again toward the $4 per share level only to fall.

To sustain itself, the stock price needs to move up and hold its gains. I see no catalyst that makes this occurrence likely.

The bottom line on APRN stock

APRN stock rose on the earnings beat…and quickly fell.

While the stock beat analyst expectations, 4th quarter revenues fell, and full-year earnings losses increased. The stock moved higher on the news, but there was little on the horizon to make the move sustainable.

No matter what APRN does, it cannot escape the fact that the company lacks a moat and competes with several corporate giants that can easily brush them aside. While the occasional upward move in the stock offers a reprieve, investors should view any move upward as a selling opportunity, not a recovery.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, https://investorplace.com/2018/02/aprn-stock-feeds-investors-dead-cat/.

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