In this Market Foolery podcast, Chris Hill and guest Kristine Harjes, host of the Industry Focus: Healthcare podcast, consider the latest on Blue Apron (NYSE: APRN), shares of which took a sharp jump after Barclays analyst upgraded them.
But before anyone decides that the company may be about to turn a corner, let's review the bidding: The founding CEO just stepped down barely half a year after taking his company public; shares have tanked from the IPO price; and the big question is whether the business model could work for any company.
A full transcript follows the video.
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This video was recorded on Dec. 4, 2017.
Chris Hill: Shares of Blue Apron up 20% this morning after getting an upgrade from Barclays. That must have been one hell of an upgrade, because 20%? This is a stock that went public in June, and then in the last few days, co-founder Matt Salzberg, who was the CEO, stepped down at the end of last week, and Brad Dickerson, who's the chief financial officer, he's going to be the new CEO at Blue Apron. Do you want any part of this stock? Even with the upgrade, I don't know. I've been reading some stuff this morning, both about Blue Apron but also about HelloFresh, which is doing a ton of advertising, and we can delve into whether or not any of these businesses are going to succeed. It's not like I look at Blue Apron and think, "They're not operating the right way, but HelloFresh, they have the right model." I'm a little skeptical of the business model in general.
Kristine Harjes: Yeah, this company has positioned itself as something that's going to be appealing to the mass market, and that's just not true. There are definitely people who will want Blue Apron who are willing to pay a premium for it -- because let's face it, it's a fairly expensive product. But I just don't see them ever reaching every single home. A larger problem with this kind of business model to begin with is, customers don't often stick around. You get a lot of people that try the service, they do it for a couple of months and then they get sick of it, or maybe they go to a competitor because the competitors are offering a discount for new members. So there's this endless churn of always needing to acquire new members. And as you get farther and farther from your low-hanging fruit, your easy core demographic, that gets more and more expensive, and that's so apparent in this business model, that they're spending so much money to acquire new people. And that's only going to get more difficult.