Shares of Blue Apron (APRN - Free Report) opened more than 10% higher on Monday after several key analysts initiated coverage of the meal-kit delivery company with positive ratings.
Blue Apron has struggled since its IPO last month, but the stock received a trio of bullish ratings today. Goldman Sachs initiated coverage of the newly-public stock with a buy rating and a price target of $11, while RBC Capital and Oppenheimer assigned it an outperform rating and price targets of $10 and $11, respectively.
The analyst notes on APRN are starting to pour in, likely because underwriting firms are barred from publishing research on IPOs for a certain period of time. These regulations are supposed to ensure that research units don’t collude with investment banking units to boost a new stock.
The bullish ratings are also coming just a few days after Blue Apron witnessed a new major competitor, Amazon (AMZN - Free Report) , enter the meal-kit delivery market. Blue Apron shares plummeted nearly 10% after news broke that Amazon had registered a meal-kit trademark, and later in the week, Amazon-branded meal kits were available online in some markets (also read: Amazon Files Meal-Kit Trademark, Blue Apron Stock Falls).
Nevertheless, analysts appear unfazed. In fact, RBC’s Mark Mahaney specifically addressed Blue Apron’s competition, arguing that the company already has a unique leadership position:
“We believe Blue Apron is addressing a large multi-billion dollar market that is nearly all Offline and taking spend away from both traditional grocers and restaurants... Blue Apron appears to be the clear leader in the U.S. market and is providing customers with a strong value proposition, particularly as it relates to ‘convenience’ and ‘variety,’” Mahaney said.
In a similar vein, Oppenheimer analyst Jason Helfstein reminded investors that the meal-delivery business has plenty of untapped potential:
“As the largest operator in the ‘subscription meal kit’ industry, Blue Apron attempts to use its scale advantage to offer quality, convenience and choice,” he said. “The potential entrance of traditional grocers, as well as Amazon, will remain an overhang. However, Blue Apron's revenue is only a fraction of our projected $524B [total addressable market], and we believe the stock is undervalued today.”
Goldman’s Heath Terry also addressed Blue Apron’s competition, citing this as the primary reason for the company’s recent struggles. However, Terry also noted that this “hyper-competition” will eventually lead to improvement on costs and growth.
Goldman and Oppenheimer’s $11 price targets represent a nearly 68% premium to APRN’s previous closing price, while RBC’s $10 call would represent gains of about 53%. Investors should note, of course, that Blue Apron debuted at $10 per share less than a month ago.
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