Why One Analyst Sees Blue Apron Shareholders Losing Another 75% in Value

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The days after the initial public offering of Blue Apron Holdings Inc. (NYSE: APRN) have been painful ones for those investors who believe in the company’s future. In fact, Blue Apron may be one of the worst performing stocks of any highly visible IPOs in recent times. And it is happening in good economic times and during a major bull market.

Now comes word that Blue Apron has been given a brand new Sell rating by a firm called Northcoast Research. The real kicker is that the firm assigned a $2.00 price target.

Northcoast Research may not be a household name to investors. And note that analysts from the underwriting syndicate are still forced to be quiet due to the imposed quiet period. Still, this is just one more bruise for Blue Apron’s bulls, and it comes on the heels of a day when the stock finally managed to rally.

Northcoast Research is an independent and unbiased investment research firm, and its research methodology uses fundamentals from experienced analysts using its own sources, proprietary data and financial models.

Some of the concerns brought up in this Sell rating and $2 target price had to do with the serious competition. Also noted was that Blue Apron is not a technology company just because it takes its customer orders digitally. Another concern is that the meal-assembly business prior to delivery is labor intensive that comes with additional costs around packaging and delivery.

24/7 Wall St. had been rather vocal about some of the issues with Blue Apron. Its building-blocks-for-cooking business model has many competitors, and Amazon.com Inc. (NASDAQ: AMZN) could wipe the company off the planet if it ever chose to. When Blue Apron’s CEO gave a CNBC interview on the IPO date, he touted that Amazon is more of an opportunity. Still, with Amazon acquiring Whole Foods it could duplicate this model in a nano-second for delivery and for in-store offerings. CEO Matt Salzberg also used almost every new age business model buzzword that investors can think of.

Just some of Blue Apron’s competitors: HelloFresh, Plated, GreenChef, Sun Basket, Home Chef and Purple Carrot.

Blue Apron’s IPO was marred even before it came public. Blue Apron initially was looking to sell 30 million common shares in a range of $15 to $17 per share with an overallotment option for an additional 4.5 million shares. That then went down to a range of $10 to $11 per share, and it priced the 30 million shares at $10.00.

Monday was the first up-day of any real measure since Blue Apron’s IPO. Its stock had previously hit a low of $7.36, but managed to close up at $8.14. Fidelity turned out to own more stock than it had been shown in the prospectus and public stock options became available for trading.

That good news from Monday now already feels old. Blue Apron shares were down 6% at $7.65 early Tuesday. Its post-IPO trading range has been $7.36 to $11.00.

It will be interesting to see if the analysts who work for Blue Apron’s underwriting firms defend the stock now that it has had a dismal IPO. CNBC touted it as the 12th worst IPO. Blue Apron’s underwriting syndicate was as follows: Goldman Sachs, Morgan Stanley, Citigroup, Barclays, RBC Capital Markets, SunTrust Robinson Humphrey, Stifel, Canaccord Genuity, Needham, Oppenheimer, Raymond James and William Blair.

If Northcoast Research is right, Blue Apron shareholders could face much more pain ahead.