There’s been a lot of talk about Blue Apron (APRN), which experienced a huge swell in stock price last week. The sudden spike led to big interest in the recent IPO, with traders clamoring to get in on the action. But is this stock really worth your time?
No way. Here, you’ll learn why — spike or no spike — I think this stock stinks, and why it should be approached with great caution.
Naturally, these are solely my opinions. I’m sharing them with you to give you insight into how I think about things in the stock market.
What’s the Deal With Blue Apron?
If you’re not familiar with Blue Apron, they’re an online meal-prep service. This is a sector that has been growing in recent years and is very buzz-worthy. But is it really sustainable?
While the business model is interesting, it may be more of a novelty than a long-term prospect. The company’s offerings are pretty expensive, and they’re constantly offering discounts, which isn’t the hallmark of an efficient or successful company, especially this early in the game.
Blue Apron also isn’t offering a necessary service, which means if the economy takes a downturn, it could be one of the first luxuries to go. Because after all, you could just, you know, buy groceries, and it would be much cheaper.
The Trouble With the Chart
Yes, clearly I’m somewhat skeptical of the business model. But the truth is in the chart, so what’s going on there?
Unfortunately, when you look at the APRN chart, it looks dismal, to say the least. In terms of building a case for this stock, there’s not much to work with, and there are plenty of red flags.
Blue Apron price action since IPO (Source: StocksToTrade)
The price action has pretty much only moved downward, and shows basically zero signs of life. The stock has been in pretty much continual decline since its IPO, going from about $10 per share to about $1.
The company’s fundamentals also leave much to be desired. The market cap is only about $200 million, the company’s debts have topped $76 million, and they have a negative profit margin. As far as I can see, they’ve never been profitable, and at the rate they’re going, it’s becoming less and less likely that they will be in the future.
In short, they’re burning through their capital. They’ll probably need to raise more money to keep going, which could lead to further dilution.
For those who think that a bigger company might swoop in and buy them up, bad news: these fundamentals most likely render them an undesirable candidate for acquisition. So hoping for such an event really just amounts to a “hold and hope” mentality, and that usually doesn’t work out in the favor of traders.
The Bottom Line
While recent news caused the share price to jump briefly, it’s likely a one-time event. Ultimately, Blue Apron hasn’t proven itself as an appetizing stock pick.
Today’s lesson: Avoid long-term downtrending stocks when they have poor fundamentals!
Remember: It’s always to approach every trade with a detailed plan and course of action. By performing thorough research, you can get a better idea of whether a stock is the right choice for you.
What do you think of Blue Apron? Leave a comment and let me know!
