Red alert: HelloFresh share price could plunge to €10 if this happens

HelloFresh (ETR: HFG) share price collapsed by more than 20% and reached its lowest level since 2020 after a surprise warning. The German meal-kit company plunged to a low of €16.4, which was much lower than the pandemic high of near €100.

HelloFresh is a leading meal-kit company that has huge operations in Germany and the United States. In a statement on Thursday, the firm warned about the challenging time in the US and downgraded its guidance. It is going through a difficult period ramping up its business in the country as the supply challenges continues.

The statement was a surprise since the company published its third-quarter financial results three weeks ago. These results revealed that its total active customers dropped by 6% to 7.07 million while the number of orders fell to 28 million. 

In terms of its finances, the company said that its revenue dropped to €1.80 million in Q3 while its adjusted EBITDA was €69.2 million. At the same time, the management said that its growth was accelerating, especially after launching its site in Arizona. The company also earmarked about €150 million for its share buybacks.

Therefore, the warning by HelloFresh is a sign that things are not going on well while its growth is decelerating. It is not alone as other meal-kit companies have struggled lately. A good example, Blue Apron, one of the pioneer companies in the industry was recently acquired in a $103 million. At its peak, it was a multi-billion dollar company.

Similarly, other companies in the meal delivery industry are struggling. In the UK, Deliveroo stock price remains about 65% below the highest point on record. Just Eat Takeaway has dropped by over 80% from its all-time high. While DoorDash stock has recovered this year, it remains much lower than its post-listing high.

This trend is evidenced by the fact that the number of active customers has been in a downtrend after peaking at over 8.2 million in 2022. There is a likelihood that this downtrend will continue in the coming years.

Therefore, it is difficult to recommend investing in HelloFresh now that its growth is decelerating. It is also unclear where the company will get its growth in the long term.

The weekly chart shows that the HFG stock price has been in a freefall after it formed a double-top pattern at €97.28 between August and September 2021. Its recent attempts to recover found a strong resistance point at €34.35. It has now dropped and retested the important point at €15.67, the lowest swing in March.

Therefore, it seems like bears are prevailing as the condition worsens. A drop below the crucial support at €15 will validate this view. It will mean that sellers have prevailed and open the possibility of it dropping to €10. 

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