Marley Spoon is a leading meal kit delivery company in a still nascent, but rapidly growing $ 12bn global meal kit market that solves the “What’s for dinner?” problem.

The company has gained impressive traction during the past 5 years, growing its revenue by 29% p.a. to c. € 328m in FY23e and created a sticky customer base of c. 307k (Q3 2023) with 95% of revenues stemming from recurring orders. Its subscribers cherish the industry-leading selection of 100+ recipes per week along with high-quality ingredients conveniently delivered to their homes and the hassle-free and time-saving cooking experience. Addressing a narrowly defined customer group willing to pay a price premium for unconventional and exotic recipes allows Marely Spoon to generate higher contribution margins than its biggest competitor, despite lower economies of scale.

The meal-kit industry provides an exciting growth opportunity and is expected to reach $ 51bn sales by 2030 (16% CAGR), mainly driven by consumers' desire for more convenience, sustainability, and learning opportunities in their meal preparation. While we expect Marley Spoon to grow sales at a 10% CAGR (FY2023-26e) due to its strategic shift from growth to profitability, the company is nonetheless well-situated to benefit from increasing e-commerce penetration rates in the global food market.

The recent macroeconomic headwinds and muted consumer sentiment have not left Marley Spoon unscathed. The company has tempered its marketing investments due to prospectively unprofitable and inefficient customer acquisition and has further streamlined its operations with G&A expenses seen to drop by 18% yoy to c. € 64m in 2024e. However, we see the company to return to sales and subscriber growth in 2024e, although at a slower pace as Marley Spoon continues to balance its ambitions for long-term growth with healthy bottom line development. As a result, the company is on track to achieve a positive operating EBITDA margin of c. 3% (eNuW) and positive operating cash flow on a group level by 2024e.

In our view, Marley Spoon presents a compelling micro-cap opportunity, which allows investors to participate in an entrenched D2C brand that looks set to return to top line growth while substantially improving the bottom line in FY24e. Trading at 0.37x EV/Sales 2023e, the stock is attractively valued and we hence initiate the coverage with a BUY and a € 8.20 PT based on DCF.