Blue Apron Could Be Ripe For A Gamma Squeeze After Falling -48% On Weak Q3 Guidance And Capital Raising

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Discusses potential gamma squeeze, guidance update and market commentary

Quant analysis indicators on the Fintel platform are pointing to a potential gamma squeeze from ingredient and recipe meal kit company Blue Apron Holdings Inc (NYSE:APRN) as the stock jumped 9 ranks this week to the top spot on the Gamma Squeeze Leaderboard.

Blue Apron’s Gamma Squeeze Potential

The rise in gamma squeeze potential is stemming from the share price falling -48% over the last two days and the Fintel put/call ratio for APRN falling -16.6% over the week to 0.33.

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Blue Apron

The fall in put/call ratio was defined by the growth in call option interest in the market which now equates to ~36.3% of APRN’s float. On top of this, Nasdaq data indicates that short interest currently equates to ~40% of the float.

The implied volatility, measured by the IV30 value now sits at 1.91 after rising 11.96% over the week.

The chart provided to the right shows the correlation between APRN shorted stock that failed delivery against the share price over the last year.

The changes in these factors were a direct result of APRN’s share price which lost -48% of its value during the first two days of this week. 

The share price weakness follows an update from management that provided weak third quarter guidance and that the company had entered a stock sale agreement to issue to raise up to $15 million in new capital through broker Canaccord Genuity. 

For the upcoming third quarter, the company expects to report sales between $109 to $112 million, which would represent a -12% decrease when compared to the $124 million generated in the second quarter. The midpoint of the guidance fell short of the street which was looking for around $125 million. 

Management said that the figure was $16 to $19 million below what they expected because of an internal shift in the timing of an anticipated bulk sale worth about ~$15 million to an enterprise customer.

For the full year, management also noted that the previous guidance of 7-13% net revenue growth would be contingent on the completion of additional bulk sales worth ~$30 million to the same enterprise customer that impacted the Q3 results.

This news comes only days after the group's CFO Randy Greben tendered his resignation to leave the company on the 17th of October to pursue another job.

Ryan Meyers from Lake Street Capital Markets mentioned that he remains confident in the APRN business fundamentals considering management left full-year guidance unchanged. Meyers believes Blue Apron is in the final stages of its turnaround strategy and sees a large opportunity to consistently grow top line sales by double digit figures. 

Lake Street initiated coverage on the company in early August with a ‘buy’ recommendation but reduced their target from $9 to $7 following the news.

APRN has a consensus ‘buy’ rating and average target price of ~$9.25, implying 300% upside to the current stock price.

APRN is scheduled to report third quarter results around the 3rd of November.

Article by Ben Ward, Fintel