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After an 80% plunge in nine months, Blue Apron shares may finally catch a break

After an 80% plunge in nine months, Blue Apron shares may have more room to fall

After a stunning free fall since its high-profile initial public offering last June, Blue Apron shares may be primed to catch a break.

After all, a stock's price can only fall so far, and it's already tumbled nearly 80 percent since its Wall Street debut. Friday marked the close of its fourth-straight week of losses, closing at $2.15 per share.

Amid the stock's wild decline from its $10 per share IPO price, Wall Street analysts are broadly bullish on the stock.

According to FactSet data, the average analyst price target on the stock is $5.10, implying a whopping 136 percent rally from current levels. The average rating is a hold.

Such optimism may come as a result of a belief the meal kit brand could be acquired by a retail giant like Walmart, which Gabelli & Co. analyst Matthew Trusz suggested last month in a note that sent shares rallying.

On Friday, Trusz reiterated his bullish outlook and buy rating on the stock, citing a Wall Street Journal report that Blue Apron would sell meal kits in "specified retailers' physical stores this year," a move that would seemingly buck the very concept of a meal kit delivery service.

"Scale is everything for Blue Apron's model and for this reason we consider brick-and-mortar retail highly attractive," he wrote. "It allows Blue Apron to monetize its excess capacity and, in theory, further minimize food waste. What's more, packaging costs should be lower when shipping in bulk to a store than when shipping to individual customers."

Blue Apron shares since IPO

Analysts appear positive because you can really "only go down so far, so why wouldn't you be positive?" said Gina Sanchez, CEO of Chantico Global.

"The company has to actually sell stuff. They're selling stuff, and people are investing with the idea that they're going to see revenue in the future. If they don't start performing, they will probably continue to fall. But at the price that we're at, I would say just a little bit of sales, they don't even have to knock the lights out, will actually stabilize the price," Sanchez said Friday on CNBC's "Trading Nation."

The options market is pricing in notable volatility ahead, said Stacey Gilbert, head of derivatives strategy at Susquehanna.

"Blue Apron is one of those names that has a ton of volatility being priced into it. If we were to look at January of 2019, going out less than a year, the probability that this stock is down another 75 to 80 percent, is around a 15 percent probability," Gilbert said Friday on "Trading Nation."

"The flip side is, there's also that probability that we see that type of move to the upside. This stock has a lot of potential movement being priced into it," she said.

Blue Apron shares are positively skewed, Gilbert said, when considering its implied probability distribution. In other words, the way the stock's options are pricing out future movements is in fact positively skewed, indicating that while downside is likely, the probability of a large move is expected to be upward.

"The expectation is that it probably will be lower, but there is this right tail, this huge possibility that it could recover, it could get back to its IPO price, and that's what keeps those options to the upside," pricing in such a recovery, she said.

The stock closed lower on Friday. It was down 2.3 percent in premarket trading Monday.

Disclosure: Susquehanna makes a market in Blue Apron shares. Susquehanna beneficially owns 1 percent or more of Blue Apron shares.