Blue Apron (NASDAQ:APRN) shares jumped 24% on Sept. 28. But APRN stock remains a shadow of what it was in its late-2010s heyday.
When Blue Apron first came public in mid-2018, the meal kit maker’s stock sold for $140 per share. The latest gains see it trading today at $6.18 with a market capitalization of $215 million.
Several factors contributed to the rally. The company announced plans to cover its debts and analysts have praised its turnaround plan. There is even talk of a short squeeze.
What’s Blue Apron?
During the last decade, there was briefly a mass movement to help young consumers learn to cook and reduce food waste with meal kits. These include recipes and pre-packaged portions for home-cooked meals delivered to consumer doors.
Our family tried Blue Apron a few times and found it was a great way to teach young people cooking skills. However, it was an expensive way to eat. Blue Apron responded by reducing its marketing spend and focusing on better service for loyal customers. The plan now is to raise the customer base to 500,000, with an aim of having a profitable $700-million-per-year business in 2024.
But this year’s food inflation may upset those plans. Cash-strapped consumers aren’t yet responding to Blue Apron’s marketing message. The company has sold $70 million in new stock to RJB Partners and still reportedly has $54 million of cash.
But then there’s the short squeeze. Fintel reported 40% of the stock being held short recently. Schaeffer Research writes this makes Blue Apron ripe for a short squeeze. Speculators at Stocktwits hope this leads it to break out to $7 per share. One posted a tweet predicting September quarter revenue will hit $133 million, up nearly 22% from a year ago.
What Happens Next for APRN Stock?
Blue Apron still looks more like a trade than an investment. The value proposition remains what it was five years ago. Traders and speculators may win upside bets in the short run, but it could head back down at any moment.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
