Blue Apron Makes a Comeback But the Street Isn't Ready to Eat

(Bloomberg) -- Blue Apron may have found the right ingredients, but analysts are hesitant to take a bite.

Shares of the subscription meal kit company have more than doubled since hitting a record low in April, and reached a five-month intraday high on Friday. Sentiment on the company has improved as it cleared up a distribution overhang and announced partnerships to attract consumers, such as a tie-in with social media influencer Chrissy Teigen.

The stock on Thursday broke above an average price target that has stayed stagnant at about $4.01 since its first-quarter earnings report in May, lifted by the company’s push to get its meal boxes to more Costco stores, particularly in the Midwest and parts of Louisiana and Texas, according to KeyBanc analyst Edward Yruma.

“This expansion is a positive sign that the on-demand offering is an attractive opportunity,” wrote Yruma, who rates the stock at the equivalent of a hold. It shows Blue Apron “has managed to overcome initial, logistical hurdles.”

The company declined to comment on requests for clarification on the scope and speed of the expansion.

Blue Apron Makes a Comeback But the Street Isn't Ready to Eat

Blue Apron announced the move into 17 Costco locations, where it sells meal kits at a discount, on its first-quarter earnings call May 3. The company’s profit beat estimates and revenue met estimates, but analysts weren’t impressed -- by the following day, six had cut their price targets.

Morgan Stanley’s Brian Nowak, the most bearish analyst on the stock, slashed his estimate from $4.50 to $2 in May. This week, he cut it by another 10 cents. His has been the only change in price targets since first quarter results.

The company’s share price has rapidly closed the gap to the Street average as investors cheered news in May that automation delays at a fulfillment facility in Linden, New Jersey, were resolved, and the company announced partnerships with Teigen, Airbnb and the James Beard Foundation.

Yet analysts may be still be looking for inspiration before making wholesale price target changes again. Second-quarter earnings planned for August 2 may be the catalyst they’ve been waiting for, with the options market pricing in a 15 percent one-day move following the results.

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