Shareholders of meal kit service Marley Spoon AG
(ASX: MMM) have been on an absolute rollercoaster this year. Shares delivered a ten-bagger since March but have since pulled back following a quarterly result that wasn’t enough to please investors.
Marley Spoon shares got down to around $2, but have since come back up to around $2.53 at the time of writing.
Marley Spoon is a global subscription-based meal kit service that operates in Australia, the United States and Europe. Its meal kits contain step-by-step recipes that are pre-portioned with ingredients that cater to a more health-conscious consumer.
Recap of Marley Spoon’s year
The reason why Marley Spoon experienced record growth in its second quarter of 2020 is fairly straight forward: lockdowns and a global pandemic all of a sudden made going to the local supermarket unappealing. Home delivered meal kits were the solution for many households, causing a huge increase in demand which Marley Spoon could cash in on.
After an impressive Q2, which sent the Marley Spoon share price soaring, Q3 couldn’t deliver the same level of rapid growth similar to the previous quarter which seems tobe why the share price fell towards the end of October.
Since then, shares have recovered slightly after the company released some announcements and presentations that outlined how the company continues to support growth into 2021.
2021 growth outlook
Marley Spoon seems relatively confident that the recent adoption of online shopping brought on by COVID-19 is not a temporary change in consumer behaviour.
As such, the company will be significantly increasing its production capacity in many of its major markets. By Q2 2021, the company plans on taking possession of a new custom-built Sydney manufacturing centre. It also recently took possession of its third production centre in Perth and additionally plans to triple its production capacity in California in 2021.
Marley Spoon also plans to invest heavily in its technology platform next year and scale its big data infrastructure to support the roll-out of prediction technology across its value chain.
Are shares a buy?
I think Marley Spoon is in a strong position moving into 2021, with a strengthened balance sheet and customer base that appears to be quite sticky with >90% of revenue from repeat customers.
The question to me is how or if consumer behaviour will in fact change in a post-COVID world. I’ll note that Marley Spoon is yet to make a profit over these last 5 years, so it seems shareholders have to assume COVID-19’s effects will result in an ongoing sustainable tailwind for the years to come.
Personally, I’m not a buyer of shares today. However, I’ll definitely keep my eyes on this one to see how it performs next year. For more share ideas, click here to read: 3 ASX share ideas for your 2021 watchlist.
