GabellI: Struggling Blue Apron Poised For $2.4B In Revenue

Life on the public market for Blue Apron Holdings Inc APRN and its shareholders has been difficult. Seven months after the company's IPO, one analyst said it's finally time for investors to buy the dip. 

The Analyst

Gabelli & Company analyst Matthew Trusz initiated coverage of Blue Apron with a Buy rating and $6 price target, suggesting nearly 100-percent upside.

The Thesis

The problems with Blue Apron’s transition to an automated facility in New Jersey are now in the past, and the company’s long-term growth story is back on track, Trusz said in a Friday note.

Blue Apron can now focus on establishing itself as an early market leader in a meal kit sector that is roughly $8 billion and 8.25 million households in size, the analyst said. 

“We expect revenue to compound over 20 percent annually to $2.4 billion by 2022, at which point Blue Apron will be generating more than $150 million of free cash flow — representing more than one-third of the company’s current enterprise value." 

Trusz said he sees Blue Apron as a relatively cheap and valuable potential buyout target for Walmart Inc WMT. Blue Apron shares are cheap relative to competitors, priced at just 0.4 times 2018 projected revenue, he said. Rival HelloFresh, for example, trades on the German market at around 1.5 times forward revenue estimates.

Price Action

Blue Apron was up 4.49 percent at $3.14 at the time of publication Friday in a very weak market, but remains down roughly 70 percent from its 2017 IPO price.

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Photo courtesy of Blue Apron.