Goldman Sachs and Morgan Stanley took Blue Apron public at $10 per share - now they say it's worth $3
- Blue Apron Holdings reported a first-quarter earnings beat but gave weak guidance for second-quarter revenue.
- Morgan Stanley says Blue Apron shares are worth no more than $3, which is far from Blue Apron's IPO price of $10. Morgan Stanley helped run that IPO.
- Goldman Sachs, which led the IPO, has a target price of $3 per share on the stock.
- Watch Blue Apron trade in real-time here.
Blue Apron beat first-quarter earnings, sending shares up more than 4% Friday.
But Morgan Stanley, which helped take Blue Apron public in June last year, still sees tough times ahead for the the meal-kit pioneer. Analysts at the firm now estimate shares are worth $2. At best, they say Blue Apron is worth $3.
"We still have questions on revenue growth, and the ability to grow profitably," Morgan Stanley analyst Brian Nowak wrote in a note. "We question whether APRN can achieve double digit growth next year and simultaneously make progress towards achieving break-even profitability given its reliance on marketing for growth."
Though Blue Apron management said the company expects to break even in 2019 with double digit revenue, Nowak's own model doesn't see profitability until after 2019. He believes more spending on marketing is needed. As a result, he lowered his price target to $2 from $4.50 and maintains his "equal weight" rating.
Nowak said the company appears to be on track in terms of improving the business's cost structure, but expressed concern over its second-quarter revenue guidance. Blue Apron forecasted revenue of $185 million - $190 million compared to Nowak's previous estimate of $210 million.
The $2 price target is a stark drop from Blue Apron's initial public offering price of $10 per share, when the company went public in June 2017. Morgan Stanley, Barclays, and Citigroup helped run that IPO, with Goldman Sachs leading the deal. Goldman Sachs currently maintains a 12 month price target of $3 and a neutral/attractive rating. Barclays has a $3.50 price target and equal weight rating.
A lot has changed for Blue Apron since its IPO, of course. Its IPO road show was crashed by Amazon's acquisition of Whole Foods. Potential investors suddenly saw the food-delivery market get a little tighter as Amazon emerged as a competitor.
By July 2017, Amazon had filed a trademark application for "prepared food kits." Competition continued to ramp up over the following months as Kroger, Walmart, and Weight Watchers also closed in on the meal-kit space.
At the same time, Blue Apron has been battling internal problems related to customer retention and its warehouse operations in New Jersey.
Blue Apron Holdings is down more than 41% this year.
