Groupon's (NASDAQ:GRPN) solid beat and bullish guidance underscores my view that the company remains one of the best positioned for the O2O trend that is gradually shaping up in North America. Overall, trends in North America remains healthy and the additional color on marketing spend was very constructive. Increased efficiency in Goods is a positive given the highly promotional holiday period. In short, stability is certainly there and I think the stock has found support at the current level after down over 70% in the past year.
I continue to be bullish on GRPN and see two positive catalysts for the stock. First, ongoing stability and growing O2O trends will continue to support the company's near-term growth outlook. Second, industry consolidation will continue to favor GRPN either as an acquirer or a target. With Facebook (NASDAQ:FB), Google (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) showing increasing interest in the local deal space, GRPN is an attractive target due to its solid industry standing.
Revenue of $917m, flat y/y and EPS of $0.04 both were ahead of consensus. More important, guidance of $2.75b-$3.05b for 2016E guidance was within expectations and the company now is guiding $80-$130m in EBITDA. Overall the quarter was very solid with FX-neutral local billing +7% y/y and this growth profile is expected to remain steady in the next several quarters before accelerating in late 2016. North America continues to gain traction with local revenue +8% on the back of a +44bps take-rate increase. Although EMEA and RoW operations continue to see persistent headwinds, streamlining the overseas operation via asset sale or exit will be fundamental to GRPN's long-term profitability.
Management provided additional color on marketing spend, which I think is constructive for the market to have realistic expectation of the company's spending going forward. In the quarter, $61m was spent on consumer marketing, a +$25m sequential increase, and most of them are centered on North America. The budget was spread across SEM, apps, subsidies, offline and display ads, and given the competitive nature and the fragmentation of the market, we can see higher marketing spend this year as GRPN look to squeeze out the smaller rivals and gain further foothold in the local deals space. Although some investors may be relieved to see the decline in discounts, it is worth reminding that GRPN can switch on the lever given how competitive the market can turn out.
Bottom line is that GRPN's Q4 was very positive and the bullish outlook is exactly what the market needs after the decline in the stock over the past year. The stability in North America will give the market some comfort on its growth outlook and I continue to view GRPN to be a leader in the on-demand, local deal market. In short, I believe the local deal space is only the surface of what GRPN can accomplish given its scale and market penetration. Future potential includes on-demand services, delivery and broader scope, all of which will be accretive to its growth outlook. I remain bullish on the stock.
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