Meal kit delivery service Blue Apron is going public. The subscription-based company will join the likes of Snapchat ($SNAP) by selling shares in their company sometime later this year. The New York-based startup will likely trade as $APRN on the New York Stock Exchange in the next few months. Until then, they’ll continue to work out the kinks of their transition from a private to public company.
There are several reasons why a four-year-old company like Blue Apron would suddenly decide to go public. At the same time, there are a handful of obstacles keeping them from being successful on the stock market. That said, would Blue Apron be worth your investment when they launch…or are they just another startup that dreams too big?
Blue Apron wants to raise money. Lots of it.
Blue Apron is looking to raise $100 million by selling shares of their company, according to their IPO filings. The money they gain will let them spend more on marketing, have better negotiating power with food providers, and grow overall as a company. This amount could also be a placeholder for the real amount the company plans on raising when they first launch their stock.
Blue Apron was profitable once.
Unlike many startups, Blue Apron posted $3 million in profit during their first quarter last year. The company hasn’t been profitable since, but the sheer fact that they were able to make money at one point might prove they could do so later in the future. In subsequent financial quarters, including the first quarter of this year, Blue Apron posted a continuous loss. Their revenue is growing, with a first quarter revenue of $245 million. When compared to the company’s $800 million in total revenue for 2016, it’s possible for them to sell a billions in meal kits by the end of the year.
What’s holding Blue Apron back?
Despite making $245 million in revenue earlier this year, the company lost $52 million in the same period. This means they have yet to post a profit since the first quarter of 2016. Blue Apron is also seeing less revenue per customer, as the average customer spent $236 this quarter and $265 during the same quarter last year.
The average value of a Blue Apron order is also decreasing. Customers spent an average of $59.28 per order during the first quarter last year, but only spent an average of $57.23 per order during this year’s first quarter. The decrease in per customer spending but increase in revenue means Blue Apron is gaining customers and seeing those customers spend a bit less.
Should you invest in Blue Apron when they go public?
The company’s success relies on adding more customers, having those customers spend more, and eventually turning a profit. If they can accomplish this while keeping marketing and food costs manageable (or lowering them), then they will likely increase in value over time. If customers lose interest in Blue Apron or continue to spend less, the company’s path to profitability will only get more difficult over time.
If you think Blue Apron will become profitable over many quarters in the future, be sure to do your research before you think about giving them your money. Once they do launch on the stock market — which will likely happen in the next few months — you’ll be able to buy them through any brokerage, including Robinhood. If you think troubled times are ahead for the delivery service, you might want to sit out the company’s IPO entirely.