Yahoo Finance’s call of the week is Blue Apron (APRN), as the meal kit delivery company received a heaping portion of bullish commentary from Wall Street analysts.
On Monday, 11 banks picked up coverage of the stock. That’s after the post-IPO blackout period ended for firms involved in the offering.
What did we get? Seven buy ratings, and four neutral ratings. That’s a pretty strong vote of confidence, with price targets ranging from $7 to $14.
This is particularly impressive given that the stock has yet to trade significantly above its already discounted $10 IPO price, with shares dropping to a low of $6.36 last week. And while these notes sent the stock soaring on Monday (up 15%), it was short-lived.
Here are some of the reasons analysts are optimistic:
RBC and Oppenheimer cite Blue Apron’s large total addressable market (TAM) as a reason for their positive outlook. Oppenheimer puts the total potential market at $524 billion, which should “buoy the growth of the meal kit industry and drive Blue Apron’s revenue growth over time.”
Goldman believes that by 2018, Blue Apron’s inventory will equal 15% of quarterly sales. That’s a strong vote of confidence, as it’s not only much lower than Blue Apron’s current inventory that’s 20% of quarterly sales, but way better than almost everyone else in the industry.
Oppenheimer justifies its $11 price target, which is 1.5x Blue Apron’s 2018 estimated sales and a 32% premium to its peer group, by the company’s 2016-2019 expected revenue growth rate of 28%. The peer group– Shutterfly, Cimpress, Sprouts, Wayfair and Whole Foods Markets– has a 2016-2019 expected revenue growth rate average of 12%.
Many analysts cited risks of competition from Amazon, especially as the e-commerce giant gets into the grocery and meal delivery space. Then to make matters worse, Blue Apron had an executive level shake-up this week with the COO stepping down. And if history is any guide, Snap, another newly IPO’d unicorn, also got a slew of positive ratings from Wall Street after the IPO blackout period ended. Yet the stock continues to slide.
No matter what, Blue Apron has a long road ahead to prove itself, and it’ll take a lot more than bullish Wall Street notes.
