As Blue Apron (APRN) stock price surges, is it a good buy?

Blue Apron (NYSE: APRN) stock price went vertical on Friday after the company bought itself time. The stock surged by over 70%, its best intraday performance on record. Despite this rebound, APRN shares remain more than 95% below their all-time high. 

Blue Apron latest news

Blue Apron, a company that disrupted the meal kit industry, has been under intense pressure in the past few years as concerns about its business model continued. The company’s annual revenue has been falling after peaking at $768 million in 2016. According to SeekingAlpha, the company’s revenue in 2022 came in at over $485 million.

Blue Apron has never turned an annual profit. Its net loss in 2022 came in at over $109 million. In all, the company has lost more than $500 million and the cash burn is increasing. There are also concerns about how long the company can stay afloat.

In a statement on Friday, the company said that it had reduced its debt burden by about $70 million. This deal allowed it to transfer its operation infrastructure to FreshRealm, a company that partners with leading retailers to solve their meal solutions.

This deal will see Blue Apron become an asset-light company since FreshRealm will handle its fulfillment centers and equipment. Most importantly, the company has now cleared its debt, making it more financially sound.

The most recent results showed that Blue Apron is doing modestly well. Its total customer count jumped to 326k from the previous quarter’s 298k. The number was lower than the 367k it served in the same quarter in 2022. The average revenue per customer came in at $346, down from the previous quarter.

I believe that Blue Apron is a highly risky stock to buy despite the new cash raise. The company is yet to turn a profit and there is uncertainty about whether the new business model will work.

Blue Apron stock price forecast

APRN chart by TradingView

The 4H chart shows that the APRN share price has been in a strong bullish trend in the past few days. This rally happened after the stock formed a double-bottom pattern. It has moved slightly above the 50-period moving average. The shares jump coincided with the soaring volume.

It jumped above the key resistance point at $8.42, the highest level on May 18th. Despite the jump, the shares will likely retreat as the momentum eases. If this happens, the stock will likely retest the next support level at $7.

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