The Marley Spoon AG (ASX: MMM) share price continued its miraculous performance yesterday and posted another record high after cracking the $2 mark. After surging another 11% in Thursday's trading session, the Marley Spoon share price is up an astounding 889% from its lows in mid-March.
Here's what's fuelling the Marley Spoon share price and a closer look at whether you should invest.
What does Marley Spoon do?
Marley Spoon is the second largest, subscription-based meal-kit provider in Australia. The company delivers fresh ingredients to customers allowing them to produce easy meals at home. Marley Spoon currently operates in 3 primary regions: Australia, the United States and Europe.
In addition to reducing the hassle of grocery shopping, Marley Spoon also provides meal-kits that contain step-by-step recipes, allowing consumers to prepare healthy, pre-portioned meals.
What's fuelling the Marley Spoon share price?
Marley Spoon experienced an unprecedented demand for its services during the coronavirus pandemic, as many consumers looked to bypass the chaos and panic buying at local supermarkets. In its most recent trading update, Marley Spoon reported a 46% increase in revenue for the first quarter and estimates that 7.5 million meals were delivered in the first quarter of 2020.
What is the outlook for Marley Spoon?
In a recent investor presentation, Marley Spoon reported lower customer acquisition costs and lower advertising rates, indicating strong retention and customer loyalty. If demand continues to remain elevated, the company predicts that its path to profitability will be accelerated. In order to make the most of the momentum, Marley Spoon recently completed a $16.6 million capital raising in order to strengthen its balance sheet and fund continued global expansion.
Global market research company Nielsen estimates that meal kits in Australia are worth over $300 million in annual sales and growing at a rate of 40% compared to 2018. The data suggests that meal kits account for less than 1% of the food and grocery market, but the sector is expected to continue to grow. In my view, Marley Spoon is well poised to take advantage of changing consumer behaviours.
Is it too late to buy shares in Marley Spoon?
In my opinion, yes, it is too late. For all I know, the company's share price could surge another 800%, however, given the recent price action I think more upside would be unsustainable in the short term.
With the coronavirus pandemic increasing the value of online and convenience services, Marley Spoon is well positioned to benefit. However, it will be interesting to see how or if grocery shopping habits change when life returns to normal.
A prudent strategy would be to wait until the August reporting season to see how Marley Spoon has harnessed this momentum and what the company's future growth profile looks like.
