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Shares of Blue Apron Holding Inc. (NYSE: APRN) were gaining today after Guggenheim Securities initiated coverage on the meal-kit provider with a "buy" rating and a price target of $9.
Analyst Matt DiFrisco cited strong leadership at the company and noted that Blue Apron is the leader in an industry he projects will grow by 25% a year over the next three years. As a result of the bullish prediction, the stock finished up 6.5%.
It was a contrarian call for a company that has been battered in its short time on the public markets and has nearly 50% of its float sold short. Blue Apron, however, does have supporters on Wall Street. DiFrisco said he expects the company to maintain its leadership of the industry, noting that it controls about 20% of the market. He also projected the company's sales to double from about $800 million last year to $1.6 billion by 2020.
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The recent IPO got another reprieve of sorts when Albertson's said it would buy Plated, Blue Apron's smaller rival, last week for an undisclosed amount. The move shows continuing interest in the sector, which is likely to see consolidation as smaller players either get acquired or go out of business.
Blue Apron's first report as a publicly traded company was underwhelming as its loss was wider than expected and revenue growth slowed to 18%, but it was unclear if that was because of falling demand or logistical problems with a new facility that should be soon corrected.
The stock has only been public for three months now, and debate continues to rage over its future as well as the broader meal-kit sector. Expect continued volatility as investors sort out the company's prospects.
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