Was that dip explained in more detail? I just noticed that the comparison to the previous quarter had conveniently disappeared. They did talk about seasonality and returning to the pre-pandemic situation, but for example, in 2019, the number of active customers increased in Q3.
Here you can find a decent level of active discussion about the company, even if it’s not an Inderes forum. There’s quite a lot of technical analysis, though.
Good point. Revenue also shows a clear dip in the latest quarter:
This was indeed explained by seasonality: people eat less at home during the summer. In 2020, this dip was not visible due to the coronavirus, as eating in restaurants was difficult in a large part of the world. In 2019, Q3 revenue remained the same compared to Q2, despite expansion into Sweden and the ramp-up of the EveryPlate brand. In 2018, Q3 revenue dropped similarly to 2021. If you look at the historical Q3 revenues of the biggest competitor, Blue Apron, they have dropped from Q2 every year. So there may indeed be some truth to that explanation.
If the revenue guidance change given in December hits even the lower end of the range, then Q4 2021 revenue should rise again from that.
Here are the analyst target prices, recommendations, and their publication dates from early 2022:
Morgan Stanley: 76.00, NEUTRAL (14.1.2022)
JP Morgan: 68.00, NEUTRAL (14.1.2022)
BNP Paribas: 51.00 SELL (14.1.2022)
Baader: 98.90, BUY (13.1.2022)
Bernstein: 51.50, SELL (11.1.2022)
Berenberg: 106.00, BUY (11.1.2022)
Bryan Garnier: 100.00, BUY (11.1.2022)
Jefferies: 114.00, BUY (10.1.2022)
The analyst coverage is comprehensive, there were a total of 20, I believe.
Here’s a good article (1/15/22) about Finland’s HelloFresh, i.e., Ruokaboksi:
-The company was founded in 2017 and was already profitable last year.
-This fiscal year, revenue is expected to reach 25 million €.
-Ruokaboksi is growing and, on top of that, profitably.
-Ingredients for the boxes come directly from producers.
“Next, it plans to seek funding that would allow customers to become shareholders.” It’s certain that Ruokaboksi would benefit from a large number of small shareholders. The options for getting small shareholders involved are:
-Loan structure (-> difficult and impractical for small shareholders)
-Crowdfunding (-> the company’s valuation is starting to get quite high for that)
-Directed issue, e.g., on its own website (-> hard to believe Ruokaboksi would undertake this)
In my opinion, this smells like an IPO. What do others think?
It could also be some kind of junk bond.
I’ll add some observations about the service to the discussion, bringing in a Peter Lynch approach.
I’ve been subscribing to the service for several months in the Netherlands. HelloFresh delivers meal boxes to your home, containing ingredients for each meal and instructions on how to prepare them. So far, the service hasn’t started making compromises, and all food must be cooked from scratch. You can select a certain number of meals for different days, and these are delivered to your doorstep once a week. The quality is excellent. The delivered ingredients are fresh, especially the vegetables. The recipes are easy to follow and result in very tasty dishes, even if you’re among the worst ten percent of cooks. This is likely due to the fact that all ‘basics’ like onions, garlic, spices, sauces, etc., are included, which you might not necessarily buy if you were just grabbing things from the store and winging it. The service is also affordable per meal for 2+ people (~€5), even competitive with buying groceries yourself, where it would be difficult to buy just the right amount of ingredients needed for a specific meal. The pandemic may have provided a temporary boost to revenue growth as restaurants are inaccessible and lunch is eaten at home, but I believe there will still be demand after the pandemic because after a commute, there’s even less desire to wonder what to eat for dinner and ponder these things at the grocery store.
Unfortunately, cooking takes a significant amount of time, usually around 20-40 minutes. I think this is the most significant negative factor why customers cancel their subscriptions. On the other hand, the service offers faster 10-15 minute meals, which are usually salad-type, or you can order less frequently if you cook for several days. The packages have started to include more pre-cut ingredients; perhaps the company is trying to address this challenge. Many acquaintances also use the service, and this has come up in everyday conversation. Customer acquisition cost is likely linked to network effects, similar to the pandemic: everyone recommends the product, but many haven’t tried it yet. The company would likely be able to acquire customers organically as well. Regarding the retention curve, I would note that it cannot be interpreted like a mobile game: a customer often doesn’t churn permanently and start playing something else. A good analogy would be Spotify or Netflix: the choice is made between whether the customer needs this type of service or not, and if they do, they return as a customer.
For me, HelloFresh is a bit like Ikea. HelloFresh: a workday, what non-ready-made food to eat every weekday at home. Ikea: moving, where to get everything for the home from one place. It solves an everyday problem affordably and easily if you choose to see it as a problem that needs solving.
This doesn’t yet answer whether the company is a good investment 
The faster preparation was mentioned in this podcast, which was brought up a couple of times in this thread. I understood that they have bought a company called Factory (and some number), which makes heated ready meals. The difference from traditional ready meals usually found on store shelves is that the meal is delivered fresh and does not need to consider long shelf lives in preservation. Of course, there are such options in stores nowadays. This service is currently only available in North America, as far as I know.
I also ordered my first package here in rural Germany, and the delivery time seemed to be over a week. Time will tell if it’s a practical solution or not.
I agree on the churn. It’s not comparable to SaaS or similar companies because customers can more easily return if they wish.
Regarding the COVID boost. It will be interesting to see the Q4 and Q1 results and what the effects of Omicron have been. In a German thread I posted earlier, it was stated in December that there had been delivery disruptions and customer service was unreachable. This could indicate strong demand and/or sick employees.
Thank you for sharing your experiences with the company’s services, it’s very interesting! My own experiences from Germany are very similar. If you have time to answer, I have a couple of questions specifically related to the Netherlands. HelloFresh often uses the Benelux countries as a testing ground for new services and products, so it would be great to hear what they actually look like. Some of the growth expectations are based on bringing these to other markets.
Apparently, HelloFresh Market was launched in your area during the pandemic, from which I understand you can order individual ingredients to be delivered home with the recipes. The purpose of this is to increase revenue by increasing the average order size. Have you used this service? How much does HelloFresh push it in its marketing, e.g., when choosing recipes? What products are available there?
As I understand it, HelloFresh in the Benelux countries has also stopped using external delivery services and built its own fleet of vehicles, with which it claims to have made the delivery service more efficient. Have you noticed any impact from this? My own experience is that most of the problems I’ve had with HelloFresh have been due to delivery delays. Are HelloFresh cars already visible on the streets in the Netherlands?
Have you noticed any other interesting new experiments?
I have noticed the same myself. The company has informed customers about temporary delivery difficulties and even asked them to pause their order for a week if possible. So far, however, all packages have arrived without problems.
Adding to the previous message, the CMD on 8 Dec 2021 described the same explanation: the product solves this weeknight problem (High levels of Anxiety + Routine) very well and expansion opportunities are identified 
https://ir.hellofreshgroup.com/websites/hellofresh/English/2000/publications.html#publication-all
How to eat on weeknights? Options:
Option 1) is X% of the market and the current core segment. HelloFresh mentions that they will expand option 2) to more markets where currently only the USA and New Zealand (Factor, YouFoodz) exist. The combined growth (CAGR) of these is expected to be >20% per year.
I will further elaborate on why a HelloFresh subscription makes the entire experience significantly better compared to grocery shopping (1):
What recipe?
Buying ingredients?
Cooking?
Price of food?
Delivery?
Delivery is only a small part of the whole. I recall that ‘food boxes’ existed abroad over 10 years ago, which only solved this part by delivering various vegetables in a box, but the solution did not become widespread. HelloFresh combines all these with quality: the impression given by the website and advertisements is very close to reality.
Thanks, @vuh, for the answers!
According to yesterday’s stock exchange releases, HelloFresh’s CFO Christian Gärtner has again bought more shares from the market. In addition to last week’s purchases, another 27k euros were invested yesterday. Furthermore, the share buyback program is progressing well; to date, HelloFresh has bought back approximately 515,000 of its own shares at an average price of €57.51 per share. Of the 250 million euros allocated to the buyback program, approximately 29.6 million has now been used.
Source: EQS News – Financial News & Events Directly From The Source
Amateur analyst did some quick calculations . HelloFresh stock price of 55€ can be justified with fairly conservative assumptions.
On December 8, 2021, the CMD presented the following graph, which the thread starter also referred to:
From this, the revenue growth rates since 2016 can be calculated as: 50%, 44%, 38%, 111%, and 55%. How to model this?
If we assume that from 2016 onwards, the growth rate would have decreased geometrically by 12% per year without the pandemic as the market saturates, we would get the following 20-year growth rates:
0.5, 0.44, 0.39, 0.34, 0.3, 0.26, 0.23, 0.2, 0.18, 0.16, 0.14, 0.12, 0.11, 0.09, 0.08, 0.07, 0.06, 0.06, 0.05, 0.04
How to model the pandemic? Let’s assume that its impact brought forward 5 years of growth from 2020-2024 to 2020 & 2021, with 2/3 in 2020 and 1/3 in 2021. This gives the following 20 years:
0.5, 0.44, 0.39, 1.2, 0.48, 0.18, 0.16, 0.14, 0.12, 0.11, 0.09, 0.08, 0.07, 0.06, 0.06, 0.05, 0.04, 0., 0., 0.
From this, we get the following revenue projection (€ BN):
These match well . Compare the company’s own statement at the CMD if 2025 is interpreted as ‘midterm’.
Midterm growth ambitions:
• Revenue € 10 BN
• AEBITDA margin 10-15%
• FCF conversion: Best-in-class
And also the company’s own targets. The assumed revenue growth rate for 2022-2025 is slightly below this:
We are targeting 20-26% (Constant Currency) revenue growth in 2022
Finally, a longer-term visualization up to 2036:
Good. Then, let’s simplify things a bit. Current Q1-Q3 revenue is €4413M, linearly interpolating to €4413/0.75 = €5884M in 2021. The table predicts €5880M, and for the longer term:
Assuming a constant number of shares of 173,501,251, the company is debt-free, and earnings can be distributed to owners (justifications * and **). With an 8% EBIT margin and a 30% tax rate, we get the following EPS:
Let’s assume that in year X, the company distributes earnings as dividends, the real required rate of return is 5%, earnings growth equals inflation, and the company no longer grows in real terms. This would mean a PE of 20 for the stock and the following price:
Discounting the stock price to the present using this 5% required rate of return:
The present value decreases from 2030 onwards by extrapolation because the growth rate does not exceed the required rate of return, meaning the company would invest all earnings, and its marginal ROE % would be less than 5%.
The current price (€55) thus includes the company’s target of growing revenue to €10 BN in 2025 + EBIT of 8%, but any performance exceeding this brings excess returns. Quality companies tend to appear reasonably priced on paper and yet surprise expectations in a way that is not evident from the numbers in this type of analysis (Revenio, Qt, Talenom, Remedy, Admicom, etc.). Markets are not won with such a superficial analysis, but the idea is to justify that the company is at least reasonably priced.
*) The company is practically net cash if one considers what part of the balance sheet is interest-bearing debt:
**) It converts earnings very well into cash flow:
Excellent modeling of future revenue! I’ve tried to model future years’ revenue through TAM growth myself, and I can try to elaborate on it here once I have time to write my thoughts down properly. However, the results are very similar to your model.
When planning purchases, if one intends to make any, and during valuation, it’s good to keep in mind that even though revenue is expected to grow by over 20% this year, 2022 might turn out to be a transitional year for HelloFresh in terms of profitability. In December, they guided for EBITDA to fall within the same range as 2021, despite revenue growth:
This includes a negative impact of 140 million from growing the tech team and other growth investments (launching new brands, expanding into new regions). However, as far as I understand, inflation has not yet been taken into account. HF has announced that it will not raise prices but rather make its own product more competitive against grocery stores by keeping prices at the same level. Grocery stores have already started raising prices. This is certainly a good long-term strategy and will help increase revenue, but it will eat into margins in the short term. Therefore, I believe that the EBITDA% will be slightly below that guidance this year.
When we also consider the 500 million euro capex for this year for capacity expansion (earmarked for increasing production capacity in many markets and increasing automation), it is quite possible that there could be loss-making quarters this year, and the full-year net profit could be clearly lower than last year. Short-term owners might be scared by this.
After the CMD (Capital Markets Day), the CFO responded to an analyst’s question about these growth investments and said they were one-off, with capex expected to return to a more normal level in 2023 (run rate 2% of revenue).
HelloFresh has been able to grow quite freely in the market, and practically everywhere it has expanded, it has pushed existing competitors into an underdog position or completely out of the market.
I’ve been trying to figure out what the risk in this case could be that I can’t see. In every respect, the current valuation is starting to look attractive for 2021e and 2022e, even considering that they are taking a bit of a breather on profitability right now.
Can others, or if I dare to tag even @Mikael_Rautanen if you also jumped on this bandwagon 
, explain why grocery stores haven’t entered this business internationally themselves? Almost all of them already have online grocery stores where you can order for home delivery or pick up from the store. What is HelloFresh’s moat that prevents grocery stores from taking over the mature market in the future? Their own picking/supply chain management? Does HelloFresh operate its own vehicle fleet, which provides significant cost advantages? 
In my opinion, the answer is, to put it bluntly, a bit like asking “why couldn’t telecom operators challenge Netflix?”.
So, of course, they have strong local infrastructure, customer base, brand, and an established position. But this is fundamentally a completely different business model than what grocery stores’ core business traditionally has been. Digitalization, “subscription” model, internationality… I believe that in an international context, agile, digitally-focused growth companies with no legacy and owners committed to front-loaded growth investments will succeed here. Surely, locally very strong competitors will emerge from grocery stores in individual markets. However, at a local level, this is probably not a very attractive business for a larger grocery store giant in many markets, because the market size is negligibly small compared to the volume of a grocery store.
In the Netherlands, I’ve noticed that grocery stores (e.g., the largest ones, Jumbo & Albert Heijn) have tried something similar as a product, not a service. They sell pre-made ‘meal kits’ in stores, HelloFresh-style, which often include all necessary ingredients and have the recipe printed on the package. However, in my daily life, these don’t replace the HelloFresh service because they are often from similar categories (e.g., vegetable soups) and the recipes remain almost the same day after day.
I still see a competitive advantage in a really high-quality and varied selection of recipes, affordability, and delivery. I’m not a retail expert, but I would imagine that copying the entire concept straightforwardly isn’t feasible. Implementation might not fit directly into a grocery store’s supply chain; significant investment would be needed to optimize the process and customer-facing technology. Additionally, the market is much smaller and can be seen as partly complementary: Jumbo in the Netherlands had a turnover of ~€10B in 2020, of which HelloFresh in the Netherlands might account for a few percent. edit: I couldn’t find country-specific percentage shares, but I guessed the magnitude of €0.2B based on the number of employees.
A couple of good answers have already been given to this, and I would add the use of data. HelloFresh has already managed to collect a huge amount of data, which it uses to predict procurement needs and optimize each week’s recipe selection. From the consumer’s perspective, this currently works so wonderfully, as @vuh said above, that it is really difficult to compete against it without that amount of data and experience.
On the other hand, many grocery store chains are trying this in the US. Kroger owns a meal kit unit called Home Chef, and Albertsons owns a similar brand called Plated. So far, these have not been able to unseat HelloFresh.
Interestingly, HelloFresh has appeared in Finnish investment social media after this thread was opened:
https://twitter.com/JukkaLepikko/status/1484626697186070531?s=20
https://twitter.com/Mikko_M_Makinen/status/1481508846812250114?s=20
HelloFresh’s stock continues to slide, and the multiples listed in the opening post currently look like this. By the way, HelloFresh’s CEO of international operations just bought €150k worth of shares at these prices yesterday, and the CFO has made nine purchases in the last few months.
EV/S = 1.73x (TTM) or 1.62x with 2021e guidance
EV/EBITDA = 17.75x (TTM)
EV/EBIT = 20.81 (TTM)
P/E = 26.78 (TTM)
Since there seems to be fear in the air and the discussion here has been so positive, let’s talk a bit about the risks. Below, I’ve listed what I believe are the biggest risks to HelloFresh’s operations in the coming years. It would be great to hear others’ thoughts on what they see as the biggest risks.
End of the pandemic and people’s consumption habits returning to pre-pandemic levels. This is certainly top of investors’ minds now that the pandemic is expected to recede this year. Will the habits of cooking at home, created during the stay-at-home period, persist? I personally believe that as restaurant dining increases again, HelloFresh’s target market will shrink by 1-2 meals per week, but I don’t believe that weekday evening dining will radically change. Grocery store visits may return to old habits, but HelloFresh solves so many problems related to them that I believe a large part of these new habits will remain. So, I believe this is a small “headwind” for the company but not an issue that will bring down the entire concept.
Increased marketing costs in the post-pandemic era. New customers have likely come effortlessly during the pandemic, but soon the costs associated with acquiring them may rise, especially if competition increases. This could eat into HelloFresh’s margins.
Competition has been touched upon by many writers in previous messages. If grocery stores find a working concept to compete against this model, it will be significant. So far, however, they haven’t succeeded for the reasons listed in previous messages. It would be great to hear more opinions from those who follow Kesko if there’s enough enthusiasm (@Olli_Vilppo). Globally, direct meal kit competitors are practically non-existent anymore. At a local level, competitors can certainly emerge, but I believe HelloFresh can locally drive down prices and make large upfront investments until volumes enable better service than competitors.
Geographical expansion is one of the pillars of future growth, but the “easy” markets in terms of food culture have now been conquered (with the exception of Finland). Last year’s expansions into Italy and Japan show how it works in countries with a stronger native food culture. If these succeed, the path will then be open for Korea, Spain, and via Mexico to Latin America. But finding cultural compatibility may be more difficult in these countries than, for example, in Germany or Sweden.
Inflationary pressure on margins. As already stated in the thread, HelloFresh intends to absorb the inflation in raw material prices without raising prices, thereby improving its price competitiveness compared to traditional grocery stores. However, if inflation runs higher than anticipated, this could erode margins in the coming years and even burn cash in connection with investments.
