Today, I’m making a couple of changes to the list of stocks I follow. First off, Yahoo, which I had not been trading for some time given the M&A speculation involved but also the lack of activity. In the end, Yahoo’s purchase by Verizon (VZ) did go through and Yahoo is no longer listed.
On a brighter side, Blue Apron (APRN) recently went through its IPO. It’s fair to say its timing was bad. To give you context, Blue Apron is a meal delivery service where customers sign up, choose what they’d like to eat and then receive everything necessary to make the meal shipped at home. It’s a business that requires scale but the bigger issue is that potential competitors such as Amazon would have a big leg up in such a business. AMZN is able to ship cheaper than anyone thanks to its efficient warehouses and shipping network. There had been hints that AMZN was interested in the food business because of its testing with Amazon Fresh among other initiatives. But just days before APRN started trading, Amazon announced its intention to buy Whole Foods which in many ways could set it on a path to compete, put pressure on Blue Apron.
As is the case in companies that end up competing with ecosystem companies (FAAMG), things will get very tricky as Amazon is able and willing to operate at zero or even negative margins for long periods of time in order to:
-successfully enter a market, especially one where it needs scale like this one
-eliminate competitors
If one of the plans for Bezos decision to acquire Whole Foods includes shipping food, and even curated boxes such as what Blue Apron does, it’s fair to say that APRN will likely not survive. Yes, some players are able to compete with ecosystem plays and one such example might be Spotify but even that one struggles to generate any profits and the big difference is the heavy pressure on costs that shipping meals around the country has generated.
For now, difficult to say how much APRN is worth or how likely it is to survive but I will be holding off trading for now (as I do for most recently turned public companies).
