HelloFresh isn’t just churning through customers and can increase its total available markets (TAM), says Jefferies.
The broker said that bears on the stock believe that the ready-to-eat food delivery service is simply churning through users and has torched the entire market.
However, the US investment bank counters this claim, arguing that 40% of users return to the service.
HelloFresh can also increase its TAM through new market expansions, ready-to-eat expansion, groceries and adjacent direct-to-consumer verticals, such as pet food and premium cuts, said the broker.
Jefferies argues that the share price, currently at €17.7, would benefit from management looking to change the narrative around the company from one that is a subscription-based model with a high degree of churn to a high-frequency e-commerce model.
HelloFresh is targeting a payback period of six months for its marketing investments, which is a “best-in-class metric even when compared to across industries,” the broker said.
In comparison, meal-kit competitors, for example, Gousto, aim between nine- and 12-month marketing payback periods.
HelloFresh is targeting investments of more than €250mln in capacity, automation, and logistics among other areas.
Jefferies welcomes the investment because the group’s “tangible infrastructure is probably the single hardest thing to copy by competitors.”