Social distancing is one of the biggest economic factors coming out of the novel coronavirus outbreak. And for a handful of companies, that’s proven highly profitable. Traders now have an opportunity to earn strong returns on this cultural shift through a long position in Blue Apron (NYSE:APRN) stock.
It’s difficult to predict exactly how long the coronavirus will reduce mobility and face-to-face interactions. However, until there’s reason to believe otherwise, the stay-at-home trade is worth betting on. And Blue Apron stock is a clear-cut stay-at-home play.
Some Food for Thought
The rapid spread of the coronavirus has changed many consumer habits. Eating out at restaurants is now viewed as risky behavior. Even a quick trip to order takeout food could be viewed as hazardous.
The health issue isn’t necessarily related to the food itself. In fact, the U.S. Food and Drug Administration hasn’t found any evidence that the coronavirus is transmitted from food or even from food packaging. The concern, therefore, pertains to interactions with people rather than contact with food items.
People can’t stop eating, but they can stop eating out. And indeed, a study conducted by GlobalData revealed that 13.7% of consumers are eating out less. That figure is likely to increase if the coronavirus persists and stay-at-home orders are enforced in more regions.
If people aren’t eating at restaurants as much, the more “obvious” trade would be to own shares of grocery stores. However, not everybody’s willing to venture outside of their homes to buy food for meal preparation.
The stay-at-home mandate means that consumers are likely to settle into the “new normal” at their homes and consider homemade meals not only as an option, but as a normal part of life now.
Delivering the Goods
Yet, this doesn’t mean that people will want to sacrifice variety in their meals. Blue Apron fits perfectly into this scenario as a provider of fresh ingredients and original recipes. As Blue Yonder senior industry strategy director Jim Hull explains, “[T]he longer this lasts, the less people will settle for frozen pizzas and reheated pasta — bolstering the case for Blue Apron and similar.”
This “new normal” has already benefited Blue Apron and its shareholders. In mid-March, the share price was between $2 and $3. It’s markedly higher than that now.
Blue Apron chief executive Linda Findley Kozlowski has reported a sizable increase in demand for the company’s meal kits. Undoubtedly, some of that demand will come from people trying Blue Apron’s meals for the first time. This could lead to long-term customers as they discover the convenience of preparing food from meal kits.
Whether Blue Apron can turn first-time customers into long-term revenue streams will ultimately depend on the company’s ability to provide great products and service. As long as the customers continue to receive their meal kits on time and the ingredients are fresh and palatable, Blue Apron’s retention rate should remain high.
The Final Word on Blue Apron Stock
At some point the world will return to some sense of normalcy, but how we define “normal” will be quite different. If you appreciate how different post-virus consumer habits will be, then you can expect Blue Apron stock to deliver fresh profits.
Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.