Canaccord Downgrades Blue Apron After Meal Kit Service Sheds 71K Net Subscribers In Q3

Blue Apron Holdings Inc APRN shares are reeling after reporting a third-quarter earnings miss Tuesday.

The food delivery subscription service has lost nearly 88 percent of its value since its 2017 IPO. 

The Analyst 

Canaccord Genuity analyst Michael Graham downgraded Blue Apron from Buy to Hold and lowered the price target from $6 to $3.

The Thesis

Blue Apron is transitioning in two major ways, Graham said in the downgrade note. (See his track record here.) 

In the core direct-to-consumer business, the company is targeting more profitable and fewer customers in its acquisition efforts, the analyst said.

Blue Apron is also more aggressively pursuing a retail business with newer products and a wide range of distribution partnerships, Graham said.

The top 30 percent of Blue Apron's customers accounted for over 80 percent of revenues in the company's first year as a public company, leading it to shift its focus and promotional spending to deepen relationships in this tier, the analyst said. Blue Apron also announced a 4-percent reduction in headcount during the quarter, he said. 

Partnerships will be a key focus moving forward, according to Cannacord, after Blue Apron recently announced integration with Walmart Inc WMT's Jet.com, Weight Watchers International, Inc WTW and a pilot program with Costco Wholesale Corporation COST.

Despite the potential for a turnaround, Graham remains cautious moving forward.

"Despite the several positives, given the guidance for continued revenue declines next year, we feel a Hold rating is more appropriate for now." 

Elsewhere On The Street 

Raymond James analyst Aaron Kessler maintained a Market Perform rating on Blue Apron.

KeyBanc Capital Markets analyst Edward Yruma maintained a Sector Weight rating. 

The Price Action

Blue Apron shares were down 0.85 percent at $1.16 at the time of publication Thursday.

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Photo courtesy of Blue Apron.