With its Q4 revenue guidance in-line with consensus, the Street is buying into Groupon's (GRPN +7.6%) assertion that its Q3 revenue miss was in large part caused by its transition from a "push" business model relying on daily deals e-mails to a "pull" model relying on customer browsing of deals and goods on Groupon's site and apps.
On the CC (transcript), CEO Eric Lefkofsky claimed mobile customers often take longer to start buying - Groupon's latest app updates try to address this - and that marketplace buyers are more likely to "wait and buy deals closer to when they intend to actually use them." At the same time, marketplace buyers are more likely to quickly redeem deals.
However, Lefkofsky also noted Gmail's creation of a separate Promotions tab for e-mails such as the Groupon's led to a double-digit drop in e-mail open rates. Moreover, with close to 40% of North American transactions.still stemming from e-mail, Lefkofsky admitted Groupon needs to do more work in building marketplace awareness.
Mobile momentum remains healthy. App downloads totaled 9M in Q3, up from 7.5M in Q2, and over 50% of North American transactions come from mobile (mobile's global share is above 40%). Also: Groupon's active customers rose by 900K Q/Q to 43.5M, and its North American active deals rose by 11K Q/Q to 55K.
Goldman is reiterating a Buy, arguing expectations are conservative and valuation reasonable, and that Groupon's U.S. turnaround provides a blueprint for international recovery.