Published: Mon, July 17, 2017
Hi-Tech | By Grace Becker

Calling a Bottom on Blue Apron Stock Is Dangerous

Calling a Bottom on Blue Apron Stock Is Dangerous

The meal-kit company already competes with similar startups as well as grocery delivery services offered by Amazon's Prime service and Whole Foods Market Inc.'s partnership with Instacart Inc.

Amazon is cooking up a plan to disrupt the meal-kit delivery business that Blue Apron helped pioneer.

Following its $13.7 billion acquisition of Whole Foods Markets, Amazon recently filed a trademark application for meal kits. About one-third of Blue Apron's value has vanished since the company went public late last month.

Amazon.com (NASDAQ: AMZN) rained on Blue Apron's (NYSE: APRN) IPO last month, and now it's a deluge on its business model. Amazon has registered a USA trademark for what looks suspiciously like a meal-kit service with the slogan "We do the prep". News of the trademark application was earlier reported by the Times of London.

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As Ruth pointed out, Blue Apron's customer acquisition costs are already out of control: "Blue Apron's marketing department is spending an exorbitant $94 per customer to get people to sign up for its service-and in the previous year, its customer growth rate has actually slowed".

Just 5 percent of households use meal kits, according to NPD Group, but the group says the number will grow as online grocers get into the game. It seems like the next logical step for Amazon's grocery ambitions, and this all points to the fact that Blue Apron doesn't own a competitive advantage in an industry with low barriers to entry - not something investors are looking for.

Thanks to the stock plunge on Monday, Blue Apron is now worth about $1.3 billion. Both meal kits are sold through AmazonFresh. Some firms declined to lend the company money because it was seen as too risky, while others weren't willing to extend as much as was requested, said the people, who asked not to be identified discussing a private matter.

Blue Apron stock was at $6.75, down 61 cents or 8.3%, in mid-morning trading Monday.

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