Up +100% in Two Weeks, This Stock is Still Trash

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2020 was the year of the meme stocks. Companies like Bed Bath and Beyond, AMC, and GameStop all had massive moves, thanks to Reddit traders and chatroom pumpers. 

The blueprint was simple. Find a stock with high short-interest, and try to squeeze the living heck out of it. 

However, the strategy stopped working in the second half of 2021 and into the first half of 2022. 

But it’s back now.

Gamestop is up 61% over the last quarter, AMC is up 105% over the last quarter, and Bed Bath and Beyond is up 222% over the last month.

One meme stock with a massive short interest is Blue Apron (APRN). 

With more than 41% of the float short, and less than 10m shares floating, short sellers were squeezed hard, sending shares up more than 100% in the past two weeks.

That pushed this little searched stock into the top 5 meme stock searches, garnering more search volume than Visa (V) or the Dow ETF (DIA).

At first we thought there might be something more to this story, so we dug into the financials.

It turns out this meal service is serving rotten eggs.

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Blue Apron’s Business 

Blue Apron (APRN) operates a direct-to-consumer platform that delivers meal kits via a subscription model, including recipes and ingredients. In addition, it operates Blue Apron Market, an e-commerce market that sells cooking utensils, pantry items, and other related products. The company also sells direct-to-consumer wine. 

APRN has shipped over 465 million meals in its ten years of business. 

The company has seen a decline in orders and the number of customers, as reported in its recent Q2 2022 report. However, the average order value increased from $62.72 in Q2 2021 to $67.14 in Q2 2022 partly due to inflation.

The company has partnerships and collaborations with Blue Cross BlueShield, Walmart, and Planet Fitness. Furthermore, they’ve rolled out new breakfast offerings, seasonal meal kits, and ready-to-cook meals. 

Similar services have popped up in the past few years including Martha Stewart’s Martha Marley Spoon, HelloFresh, Home Chef, Clean Eatz, and more.

Financials

Peak revenues for APRN were in 2017 when it did $881.1 million. Since then, the company has struggled to regain its dominance. While 2020 should have been the year it busted out, with so many Americans locked in their homes, it managed to eek out $460.6 million in revenues. 

To make matters worse, its gross profits continue to decline. 

But the real problem is the company has not generated positive operating cash flow…ever.

During its most recent quarter, the firm had $54 million in total cash and total debt of $63 million. APRN has a current ratio of 1.22x, which means it has enough liquid assets to cover its short-term liabilities. 

Valuation

APRN has a diluted EPS (ttm) of -$4.29. And an EBITDA of -$83.96 million. On the bright side, its price-to-sales ratio is 0.25x, which is better than the firm’s 5-year average of 0.30x.

The company has a cash-to-share ratio of 1.61x, which is solid, all things considered. Yet, that number continues to dwindle as operations burn cash at an increasing rate.

Profitability

APRN is nowhere near profitability. The company has a return on equity of -212.44%, and a net income margin of -25.21%. Furthermore, its EBIT margin is -23.07%, and its EBITDA margin is -25.21%. APRN is bleeding money left and right. The company has an operating margin of -22.9% and a profit margin of -25.20%

Growth

Revenue growth is down -4.73% (YoY), which is not a good sign for a business that has yet to reach profitability. Its EPS this year is -29.7% However, the company is projecting forward revenue growth to be 8.9%. Furthermore, its working capital growth (YoY) has improved to 42.65%. 

Our Opinion 1/10

If you trade, APRN is compelling. The company has a short float of 41%, which means that any positive news catalyst can send it off to the races. If you’re an active trader, it’s worth keeping APRN on your radar, as it’s one of the more popular “meme stocks” out there. 

As for investors, the only hope for this company is a buyout. Otherwise, subscribers will be heading back to the grocery store sooner rather than later.