Could Walmart potentially buy Blue Apron? One analyst thinks so, which sent shares for the meal kit delivery service up nearly 7 percent on Friday.
According to CNBC, analyst Matthew Trusz of Gabelli & Company recommended the stock as a buy to investors, saying Blue Apron is “turning the corner on well-publicized operational issues.”
Last month, Crunchbase ranked Blue Apron as the worst-performing tech initial public offering (IPO) in 2017 after it launched at $10 before ending the year at $4.29, a decline of a little more than 57 percent.
In October, the company had to lay off about 6 percent of its workforce, while in November, it admitted that its new fulfillment center in Linden, New Jersey was hurting its profits.
But as Blue Apron recovers from these setbacks, it could be an attractive acquisition for a company like Walmart that is looking to boost its eCommerce business, said Trusz.
“Like its $310 million purchase of Bonobos, buying Blue Apron would repeat Walmart’s playbook of acquiring a branded eCommerce startup with a more premium product to its core offerings,” Trusz wrote in a note to investors. “Further, Walmart could put Blue Apron’s meal kits into its physical stores, which we believe would meaningfully enhance Blue Apron’s profitability (more scale, less packaging).”
Trusz estimated that Blue Apron would most likely sell for about $6 a share. The company has an $8 billion addressable market, and that number will only grow as more consumers turn to online grocery ordering.
In addition, Trusz believes that Blue Apron could give its addressable market a boost by selling products at brick-and-mortar locations and offering meals for special dietary needs.
“We expect revenue to compound over 20 percent annually to $2.4 billion by 2022, at which point Blue Apron will be generating more than $150 million of free cash flow – representing more than one-third of the company’s current enterprise value,” Trusz wrote.