Can Blue Apron Avoid Bankruptcy?
Peter Sayles |
Blue Apron (APRN) declared “mercy” from investors…
Blue Apron’s narrative – like most Silicon Valley companies who don’t earn any profits – was always valued on revenue growth.
The problem APRN has always had was just that… revenue growth.
That’s why the stock is down over 88% since it went public in June 2017. (We’ve successfully profited off APRN’s demise multiple times. Including a recent 55% and 128% gains on 2019 puts.
And finally… APRN capitulated and said it was going to forego revenue growth.
Blue Apron announced on their earnings call earlier this November that their revenue is decreasing…they lost customers… they’re cutting marketing expenses… and they’re cutting their workforce by 4%.
Which means “Hey remaining investors. Whoever still owns our stock. We’re no longer focusing on the sole reason you’ve invested in us in the first place.”
We knew this was coming… we talked about it in our post this past August. We named it as a stock that is “guaranteed to lose you money long term.”
It’s a company which tries to “make it up on volume.”
But now APRN doesn’t want to make it up on volume anymore. It’s just scaling back its business altogether.
We think the Costco partnership failing in less than six months was the final straw that broke the camel’s back.
We also noticed APRN doing some photo ops and marketing in Whole Foods. (That’s our “boots on the ground” research.) If anything gets announced, the stock might pop.
But we don’t see how this would change anything… And it would make us consider buying more put options as APRN flirts with bankruptcy.
APRN’s acquisition costs were more than $400 per customer. But they were only generating $236 on that customer. (Not the best business model).
This simple fact is what forced APRN to cut back.
CFO Tim Bensley had a bunch of excuses as to why APRN struggled this past quarter:
He cited seasonality as one. And shifting more towards online as another.
We’re not sure they were really using any other marketing channels… but okay.
Bensley told investors they have “undertaken a full reassessment of the organization and are highly optimistic about our future.”
You know what that means?
“Everything we’ve done prior hasn’t worked. We’re going to try a whole new strategy. We hope you’re patient enough to stick around.”
We feel sorry for anyone that’s still holding.
APRN is flirting with bankruptcy if it doesn’t get some sort of miracle (either getting taken private or some sort of buyout).
Investors looking at put options for profit opportunities should exercise patience. There’s little volume. And put options are a bit pricey.
We hope there’s some press release that would send shares higher… giving us a new entry price.
We’ll let you know when that time comes.