The impact of COVID on accelerating the digitisation of the economy has caused some dramatic stock re-ratings and none more so than for online meal delivery service provider Marley Spoon (ASX:MMM).

Its share price has risen more than tenfold (1039 per cent to be precise) since its post-COVID low in March, and that’s much more than for other high flying tech stars like Afterpay (ASX:APT) (+788 per cent) or fellow e commerce provider Kogan (ASX:KGN) (+402 per cent).

There are several good reasons why that’s so. Indeed, they suggest that Marley Spoon should still offer strong medium term price gains from the current level.

This video explains the strength of the company’s value proposition, business model and industry positioning.

 
Now let’s overlay a few comparatives:

A key difference between Marley Spoon and its e commerce peers like Kogan is that it provides not just the online delivery of products, but it adds an experiential layer by offering a healthy, waste-minimising cooking activity for families and partners to enjoy at home.

This, along with a narrow mix of SKUs (stock keeping units) spells higher margins.

These are already evident at the gross contribution level and they will become apparent at the EBITDA level as the company is now rapidly transitioning into earnings positivity.

Another difference with Kogan for example, is that Marley Spoon is in a larger vertical (the $US8 trillion grocery space) with a very low ecommerce penetration rate.

Indeed, Marley Spoon’s offering was specifically designed to change that.

The fact that Woolworths is a strategic ally and shareholder helps validate that.

A key reason why there’s still good upside despite the incredible run the stock has already enjoyed is that it is still attractive fundamentally, with a revenue multiple of less than 1x.

Afterpay’s, for example, is now approaching 50x.

THE MARLEY SPOON VALUE PROPOSITION

    • Health and wellness – healthy fresh ingredients along with healthy recipes
    • Convenience – high usability web site for easy ordering
    • Affordability – more affordable than buying the equivalent ingredients
    • Eco friendliness – much less food wastage (circa 1% only)
    • Social cohesion – for couples and families by easy participation in the meal cooking process
    • Habituality – a favourable meal experience creates strong repeat purchase behaviour, which averages in excess of 90 per cent once a customer places their 6th order

 

Disclosure:  The author believes his own banter and is a shareholder in MMM.

 

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