Analyst Matthew Trusz initiated coverage of the brand on Friday, recommending the stock as a buy to investors. He said Blue Apron is "turning the corner on well-publicized operational issues" that dragged its share price from $10 in June to a little over $3 in current trading.
As recently as November, the company confirmed that its new fulfillment center in Linden, New Jersey, was a drag on profits. Trusz expects this will no longer be a major issue in the "seasonally important" first quarter of 2018.
As Blue Apron recovers from recent stumbles and matures into a profitable business, it could be a highly sought-after acquisition target. Trusz pointed to Walmart as a "logical buyer," citing the retailers' desire to beef up its e-commerce business.
Shares of Walmart were up about half a percent on Friday.
Walmart already offers some meal kits online and could benefit from Blue Apron's food manufacturing capabilities, he said.
"Like its $310 million purchase of Bonobos, buying Blue Apron would repeat Walmart's playbook of acquiring a branded e-commerce startup with a more-premium product to its core offerings," Trusz wrote in a note to investors. "Further, Walmart could put Blue Apron's meal kits into its physical stores, which we believe would meaningfully enhance Blue Apron's profitability (more scale, less packaging)."
If Blue Apron were to be acquired, he said, it would probably sell for about $6 a share.
Trusz estimates that Blue Apron has an $8 billion addressable market, or about 8.25 million households, and that number will only continue to grow as more consumers adopt online grocery ordering.
Blue Apron could also continue expanding its addressable market by selling at brick-and-mortar locations, adding new dayparts and offering up meals for special diets, he said.
"We expect revenue to compound over 20 percent annually to $2.4 billion by 2022, at which point Blue Apron will be generating more than $150 million of free cash flow — representing more than one-third of the company's current enterprise value," Trusz wrote.
The company already has started testing the waters in offering specialized programs. In January, it started selling a Whole30 meal plan. The 30-day diet plan, which will be available through Feb. 26, focuses on "whole" foods such as fresh fruits and vegetables and eliminates items like sugar, alcohol, grains, soy and dairy.
Blue Apron is set to report fourth-quarter 2017 earnings before the opening bell on Feb. 13.