Blue Apron Holdings, Inc. (APRN) runs a direct-to-consumer platform that distributes original recipes made with seasonal and fresh ingredients. It also runs Blue Apron Market, an online store that sells products like kitchenware, pantry essentials, and other things. The company primarily provides its services in the United States through order selections on its website or mobile application.
Last month, the company reported a higher-than-expected second-quarter loss and lower-than-expected revenue as orders and customers declined. In addition, it lowered its full-year outlook, citing "persistent inflationary pressures."
Also, during the second quarter, APRN raised $20.5 million in equity and entered into a new debt agreement worth $30.0 million. While the new debt and cash on hand were used to repay the company's senior secured term loan, lowering overall debt service obligations and extending debt maturity to 2027, using equity financing could dilute existing shareholder value.
APRN’s shares have more than doubled recently as investors have re-engaged in the so-called meme trade. Its shares rallied 88.3% over the past month. However, the stock has declined 53.9% over the past nine months to close its last trading session at $5.61.
Here's what could shape APRN's performance in the near term:
External Financing through Private Placement
On August 7, 2022, the company and RJB Partners LLC, an affiliate of Joseph N. Sanberg, amended the April 2022 private placement agreement, whereby RJB agreed to purchase from the company 1,666,667 shares of Class A common stock under the original agreement at a price of $5 per share rather than $12 per share, and additional 8,333,333 shares of Class A common stock for $5 per share, for an overall investment of $50.0 million.
The company anticipates using the proceeds of the private placement to fund its long-term growth strategy, with $25.0 million of that amount to be put to strategic uses to increase shareholder value.
Disappointing Financials
APRN's total revenue increased marginally year-over-year to $124.24 million for the second quarter ended June 30, 2022. However, its operating loss grew 84.2% from the prior-year quarter to $22.67 million.
The company’s net loss surged 24.4% from the year-ago value to $23.12 million. Its loss per share amounted to $0.68. In addition, its net cash used in operating activities came in at $2.87 million, representing an increase of 68.4% for the six months ended June 30, 2022.
Negative Profit Margins
APRN's trailing-12-month CAPEX/Sales multiple of 1.1% is 65.5% lower than the industry average of 3.2%. Also, its trailing-12-month ROA, net income margin, and ROE are negative 53.5%, 25.2%, and 212.5%, respectively. Moreover, its trailing-12-month negative EBITDA margin of 18.3% compares to its industry average of 12.3%.
Poor Earnings Estimates
Street expects the company’s EPS to decline 28% per annum over the next five years. Also, its EPS is expected to remain negative in the current and next year. In addition, APRN failed to surpass the consensus EPS estimates in each of the trailing four quarters.
POWR Ratings Reflect Bleak Outlook
APRN has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. APRN has a D grade for Stability, which exhibits higher volatility than its peers.
Of the 65 stocks in the F-rated Internet industry, APRN is ranked #43.
Beyond what I've stated above, you can view APRN’s ratings for Growth, Quality, Momentum, Value, and Sentiment here.
Bottom Line
APRN's poor bottom-line performance owing to slowing consumer demand amid persistent inflationary pressures is concerning. Furthermore, rising competition in the meal kit market could mar the company's growth.
Given its poor financials, weak earnings estimates, and negative profit margin, we think the stock is best avoided now.
How Does Blue Apron Holdings Inc. (APRN) Stack Up Against Its Peers?
While APRN has an overall D rating, one might want to consider its industry peers, Yelp Inc. (YELP), trivago N.V. (TRVG), and Expedia Group Inc. (EXPE), which have an overall B (Buy) rating.
APRN shares were trading at $6.63 per share on Wednesday afternoon, up $1.02 (+18.18%). Year-to-date, APRN has declined -1.49%, versus a -15.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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