Final Trade Detail

Blue Apron

Investors who followed this trade Generated a

29% Return

Open Date

2/15/19

Close Date

2/27/19

Hold Time

12 Days

Buy Price

$1.49

Close Price

$1.06

%Gain/Loss

29%

Original Recommendation

Blue Apron

Blue Apron (APRN)

our opinion

sell

current price

$1.49

target price

$1.00

market cap

$289M

div yield

0%

  • Blue Apron earns about $240 per customer. But it costs more than $400 to acquire that customer
  • Blue Apron has never earned money in its history. And it doesn't forecast profitability any time soon (on a real accounting basis)
  • Blue Apron has more than doubled over the past 2 months on almost no news. This gives us a perfect entry opportunity to go back and short the company

trade details

Blue Apron is one of our top whipping boy companies.

We labeled it a company “guaranteed to lose you money long term.”

And that’s exactly what it has been for investors.

The stock is down 84% since its IPO peak. (And 33% from our write up above).

The stock has been a one way ticket down. It’s been close to free money. Grant and I have traded Blue Apron puts multiple times. We’ve made money 100% of the time.

We think it’s likely headed for bankruptcy in the future unless some major retailer, grocery store, or private equity company is willing to take a flier on it.

(We wrote about whether it can avoid bankruptcy here and here.)

It reached a low of $0.66 December 21 – amidst the entire market selloff.

And it’s rallied 125% since. But we’re not sure why.

Blue Apron still faces all the same problems. Their revenues are declining. Customers are leaving. They have no moat. More competition keeps coming in. And they still lose money on every single customer they acquires.

We don’t see any reason Blue Apron’s stock is worth much. We think the rally came from all the shorts locking in gains as the market has staged a massive rally.

This is where our opportunity lies.

Take a look at any of their three financial statements (balance sheet, income statement, statement of cash flows) and you’ll see nothing but warning signs.

It has never earned a profit on a net income basis. And it even sites profitability as one of its top “risks” on its financial statements.

Second, its revenue per customer hasn’t budged in years – roughly $240 per customer. Its average number of orders are stuck in the mud too – at about four orders per customer.

Third, it told investors it’s cutting back on marketing expenses… which is the only way to acquire new customers. Blue Apron is expensive. It’s competing with hundreds of other meal delivery kits.

The only way to entice customers to try Blue Apron is with discounts. But once you condition customers to look for discounts, they’ll never pay full price.

Cutting marketing expenses is not what investors want to see for a growth stock.

Fourth, both Grant and I have tried Blue Apron. We’ve tried Hello Fresh. And we’ve tried a few other meal delivery kits.

There’s nothing special about Blue Apron. Or anything it has to offer. The food was good. But not something we’d continue to pay for over another meal kit.

It’s nothing against Blue Apron. But we just don’t see why investors continue to own this stock in the first place.

The partnership with Weight Watchers won’t work (we wrote about it here). Just look at its failed partnership with Costco – which failed within six months.

Blue Apron is also moving the goal post on its profitability numbers… by using “Adjusted EBITDA.” EBITDA was created as a way to strip out a bunch of the accounting noise.

Yet Blue Apron needs more help. And is asking investors to believe in a second “adjustment” to its profitability.

We’ve been waiting for this moment for months… a chance to short Blue Apron yet again.

Now’s the perfect time to dip back into the well to make some money.

Short Blue Apron down to $1.35.

Or you could buy Blue Apron January 2020 $1.50 puts for $.50-$0.60. That means Blue Apron needs to fall below $1 by January 2020 for us to make money.

***Prepare for volatility. The market is rallying very quickly.  And Blue Apron still has 20% of its shares sold short. Blue Apron could continue to rise with a short squeeze. Be prepared. And always remember to place your position with proper position sizing.