Blue Apron (APRN) Gains as Wall Street Issues a Collective 'Buy' on Beaten-Down IPO

Since coming public on June 29, meal-kit company Blue Apron (NASDAQ: APRN) has seen just a handful of positive sessions and is down a whopping 35% from its IPO syndicate price. That all changed today as underwriters of the offering were mostly positive as the quiet period ended, boosting shares 15% to $7.54.

7 out of the 11 firms launching coverage today issued a buy, or equivalent rating.

The biggest underlying driver for Blue Apron's underperfomance since its IPO has been competitive fears from Amazon's takeover of Whole Foods. Analysts addressed this factor in today's research.

Oppenheimer's Jason Helfstein, who started at Outperform ($11 PT), said competition is priced in and they see the market opportunity as "huge" at an estimated $524 billion. Trading at just 0.9x 2018E sales, risks are adequately discounted at these levels, he said.

Needham's Kerry Rice (Buy, $10 PT), said the company's direct connection to producers creates a competitive moat and establishes a foundation to build a better food ecosystem. Rice notes that in 2016, the company purchased from over 300 food suppliers, and approximately 70% of its food spending was with exclusive suppliers.

Goldman Sachs' Heath Terry, who's rating got the most buzz on Wall Street today, said Blue Apron is the leader in a largely venture stage category. The hyper-competition is typical of early stage, fast-growing consumer internet opportunities, he said. While this drives near-term customer acquisition costs and churn higher and growth rates lower, "as competition normalizes we see Blue Apron maintaining its lead in a larger category with more rational economics." The high risk at this stage is more than offset by the potential reward, he said. Terry rated shares a Buy with an $11 price target.

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