The Marley Spoon AG (ASX: MMM) share price is out of form on Monday and is sinking lower.
In afternoon trade the subscription-based meal kit company’s shares are down 6% to $2.71.
This latest decline means the Marley Spoon share price is now down almost 29% from the 52-week high it reached just under a month ago.
Why is the Marley Spoon share price down 29% in a month?
Investors have been selling the company’s shares since the release of its half year results at the end of last month.
Although Marley Spoon delivered a very strong result, investors appear to have been expecting even more from the company. Especially given its incredible share price increase since the start of the year.
Year to date the Marley Spoon share price is still up 868% even after its sizeable pullback over the last few weeks.
Why is Marley Spoon on fire in 2020?
The catalyst for this incredible rise has been the strong demand the company has been experiencing because of the pandemic.
Lockdowns and social distancing initiatives have led to more and more consumers skipping restaurants and cooking at home. For the same reason, Breville Group Ltd (ASX: BRG) has reported very strong sales of its kitchen appliances this year.
In the first half of FY 2020, Marley Spoon reported an 89% increase in revenue to 116.2 million euros. Almost two-thirds of this revenue was generated in the second quarter at the height of the pandemic.
This was driven by a 104% increase in active customers to 350,000, a 5% lift in orders per customer to 4.4, and a 7% rise in average order value.
But perhaps best of all, this was achieved at a significantly lower customer acquisition cost. This led to Marley Spoon becoming operating cash flow positive by the end of the half.
In light of this strong form and continued solid demand in the third quarter, management upgraded its revenue growth guidance for FY 2020 to between 80% and 100%.
Is it too late to invest?
I think Marley Spoon is an exciting company and worth keeping a close eye on. But for now, I would suggest investors keep their powder dry and wait to see how it performs when the crisis passes.
At that point, I think it will be easier to judge whether its current valuation is appropriate or excessive.