The coronavirus pandemic has forced consumers to drastically change their lifestyles. As a result, the value for convenience services are increasing as consumers look to adapt to the new normal.
Although traditional service providers and shopping centres have struggled in the coronavirus pandemic, some companies have thrived. Marley Spoon (ASX: MMM) is one ASX small-cap share that has seen unprecedented demand during the pandemic, with the company’s share price surging more than 370% since the start of the year.
What does Marley Spoon do? Marley Spoon is a subscription-based meal-kit provider that delivers fresh ingredients to customers, allowing them to produce easy meals at home. The company currently operates in 3 primary regions: Australia, the United States and Europe.
In addition to reducing the hassle of grocery shopping, Marley Spoon also provides meal-kits that contain step-by-step recipes, allowing consumers to prepare healthy, pre-portioned meals. With the coronavirus pandemic increasing the value of convenience services, Marley Spoon is well poised to take advantage of changing consumer behaviours.
How has Marley Spoon performed in the coronavirus pandemic? Late last month, Marley Spoon released an update informing the ASX that the company had experienced and unprecedented surge in demand on the back of the coronavirus pandemic. In order to manage the significant increase in business, Marley Spoon informed investors that the company intends to scale up its operations and expand its global workforce. Marley Spoon also assured investors that its food supply chain has been resilient despite travel restrictions.
Marley Spoon has already had a strong start to 2020, with the company forecasting that revenue for the first quarter is expected to grow more than 40% in comparison to the prior corresponding period. In addition to accelerated revenue growth, Marley Spoon also noted that the company had seen a significant drop in marketing expenses and customer acquisition costs as a result of the surge in demand.
Should you buy? The Marley Spoon share price has almost had a vertical ascendance. From a risk management perspective, I can’t advocate buying shares in a company that has run so hard, so fast. That being said, the way consumers behave during the coronavirus pandemic could end up being the new normal. As a result, companies like Marley Spoon could benefit from a new wave of growth.
I think a prudent strategy would be to keep Marley Spoon and similar companies that could be market leaders on a watchlist and wait for a pullback before making an investment decision.
The post This ASX small-cap has surged more than 370% on coronavirus demand appeared first on Motley Fool Australia.
Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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