As Amazon.com Inc. dives harder into food, Blue Apron Holdings Inc. is showing little fear in seeking a higher valuation.
set the price range for its initial public offering Monday, which would give the company a $3.2 billion public market capitalization, notably higher than its last private valuation of $2 billion. The IPO target arrived just one business day after Amazon
announced its intention to buy Whole Foods Market Inc.
for $13.7 billion, a move that suggests Amazon could aim for Blue Apron’s clientele.
Experts said Monday, though, that Amazon’s Whole Food move may not affect Blue Apron in the short-term and could even help the company. Blue Apron could avoid the brunt of Amazon’s entrance into the food sector thanks to its model of delivering preplanned meals, which differs from a traditional grocery store or even a more basic food-delivery startup, said Leslie Pfrang, partner at Class V Group, an IPO advisory and management firm.
“Meal kits require a very different business model than a grocer like Whole Foods brings to Amazon, and I do not think Amazon will be able to leverage that asset to do meal kits,” Pfrang said.
In fact, Amazon’s push into the grocery space could even help Blue Apron, as it will likely bring more technological innovation to the sector, she said. This will likely disrupt the sector and could push more consumers to think of options outside the traditional grocery store, she said.
Still, Kathleen Smith, principal at Renaissance Capital, a manager of IPO-focused ETFs, said she believes Amazon’s interest in Whole Foods is still evolving, which means it could affect Blue Apron longer-term.
“I think that [Amazon] is still trying to figure out the most profitable way to do this,” Smith said.
In an updated filing Monday, Blue Apron added a risk factor that seems to speak to uncertain risks coming from the Amazon acquisition.
“Business combinations and consolidation in and across the industries in which we compete could further increase the competition we face and result in competitors with significantly greater resources and customer bases than us,” the company added to its prospectus.
Smith said she believes Blue Apron would be hit harder initially if it were just a grocery delivery service. Experts have raised concerns about the fate of Instacart, a grocery delivery service that has a five-year deal with Whole Foods, according to Recode and other outlets. It could also have an impact on the postponed initial public offering of grocery chain Albertsons Co.
Shorter term, Amazon could hurt Blue Apron by bringing “a little more” uncertainty to its issue price, Smith said.
Blue Apron set a projected price range Monday of $15 to $17 a share. The fair value per share calculated for the company’s stock options had risen to $15.99 as of May 2017.
Thus far, Blue Apron’s valuation looks reasonable, Smith said, as it is valued at a little more than three times trailing sales. The issue, when compared with others in the space, is that the company is still unprofitable. To become profitable, Blue Apron needs to have “stickiness” with its customers, meaning they continue to use the service, she said. This has been an issue for the company as it has seen its average revenue per customer falling to $236 from $265 in the first quarter of the year.
“Over time, our customers on average order less frequently or sometimes cease ordering, as evidenced by the declining increases,” the company said in its prospectus.