Yahoo Finance Groupon Rides on E-Commerce & International Expansion - Analyst Blog
We updated our research report on Groupon, Inc. GRPN on Jul 7, 2015.
Groupon reported soft first-quarter 2015 results. While the company's loss per share was in line with the Zacks Consensus Estimate, revenues lagged estimates. Additionally, management’s tepid financial outlook weighed down by ongoing investments and stiff competition remained a drag.
Nonetheless, Groupon is benefiting from rising e-commerce spending on mobile devices, a profitable domestic market and an underpenetrated international market. In addition, product launches will boost user retention while making it easier for merchants to connect to new consumers. These opportunities are likely to drive top-line growth and profitability over the long run.
Currently, Groupon is focusing on its 3Ps — Push, Pull and Platform — goal. Push, which signifies flash deals for the company, is expected to grow on the back of North American email business, and help the company gain traction in the local marketplace. Further, with the Pull market strategy, Groupon expects to grow active deal count in 2015 at a similar rate as the previous years.
Its Platform business strategy, which involves real-time deals, is likely to see growth on the back of increasing customer engagement. The inclusion of more coupons and deals that offer more flexible structures for merchants and at the same time are profitable for users will eventually benefit the company.
However, despite growing billings and revenues, Groupon is not profitable. As organic growth continues to slow down, the company is looking to pursue acquisitions that will expand its footprint. However, declining cash flows will hurt Groupon’s liquidity, which could hamper its expansion plans.
Further, Groupon’s business model makes it heavily dependent on daily deals, which is a major headwind. Since most of the offerings are consumer discretionary products, demand is heavily dependent on macroeconomic conditions.
The company’s ongoing transition to the live pull marketplace has removed the sense of urgency associated with email-based push daily deals business. As redemptions are high and unused Groupons are low (revenues recognized upfront in daily deals, so an unused Groupon boosts the company’s revenues), the transition is expected to negatively impact the top line in the near term.
Groupon currently has a Zacks Rank #2 (Buy). Other well-ranked stocks in this sector include Blue Nile Inc. NILE, and Expedia Inc. EXPE with a Zacks Rank #1 (Strong Buy) and Autobytel Inc. ABTL with a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
GROUPON INC (GRPN): Free Stock Analysis Report
EXPEDIA INC (EXPE): Free Stock Analysis Report
BLUE NILE INC (NILE): Free Stock Analysis Report
AUTOBYTEL INC (ABTL): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
