- The stock of Blue Apron has risen by 8x despite a 9,000-point drop in the Dow Jones.
- The company faced bankruptcy a year ago, and it could spark the start of a miraculous recovery.
- Costco, Walmart, Target, and other retailers have risen by over 10% in the past week.
While the Dow Jones Industrial Average (DJIA) plunged by 9,000 points since February 19, one stock surged by 8x within six days after facing the risk of bankruptcy merely a year ago.
Blue Apron, a meal-kit maker based in New York that exclusively targets the domestic market, saw its stock spike from $2.17 to $16.25 by more than 648 percent since March 13.
From Silicon Valley’s darling to near-bankruptcy to stock price recovery
In 2015, before its initial public offering (IPO), venture capital investors placed a price tag of $2 billion on Blue Apron.
At the time, the popularity of ready-to-cook meal kits started to increase rapidly. On average, Blue Apron was selling about 3 million meals per month, equivalent to around $30 million in monthly cash flow.
For an early-stage venture-backed startup, the relative cash flow and revenues made the company more attractive to investors.
The main problem of Blue Apron was that preparing millions of meals every month required a significant amount of costs, and it struggled to maintain a profitable business.
Less than three years since its IPO in 2017, the Blue Apron stock plummeted to $2.17, recording a 97% drop since its $2 billion valuation merely five years ago.
The stock halved as the Dow Jones recorded its biggest drop since 1987, applying immense selling pressure on a company that already lost the majority of its value.
Dow Jones crisis turns into an opportunity
The Dow Jones and the U.S. stock market plummeted below every major support level in the past month, breaking an 11-year price trend in just three weeks.
The fear in the stock market has continued to amplify as concerns towards the coronavirus pandemic grew, pushing institutional investors to sell-off high-risk assets at the time of extreme uncertainty.
But, the coronavirus outbreak has led to an increase of appetite for home cooking, massively raising the sales of Blue Apron’s meal kits.
The company still faces similar problems as before. In the upcoming months, the trend of the stock would primarily depend on two factors.
One, it remains unclear whether the continuation of the Dow Jones sell-off would prevent a consistent upsurge heading into the 2nd quarter of 2020. The sentiment around the Dow Jones remains negative due to the projection of weak earnings.
Second, the profitability of Blue Apron with an operation in the scale of millions of meal kits on a monthly basis remains in doubt.
In the short-term, delivery firms and retailers expected to prosper
Walmart, Target, and Costco stocks have risen by 17%, 10.8% and 10% respectively since the steep Dow Jones pullback on March 12, as investors look towards potential single stocks that could perform well in a gloomy macro landscape.
Based on its performance in the past week, Blue Apron could be one of the odd stocks out alongside Walmart, Target, and Costco to outperform the Dow Jones and the majority of stocks in the U.S. equities market.
Last modified: September 23, 2020 1:39 PM