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- Groupon has reoriented its business model to be more mobile-centric.
- By making various changes to its mobile application, the company has been able to increase active deals and buyers.
- Over time, I expect revenue and margins to improve, which makes GRPN a compelling growth investment opportunity.
- Groupon had a good investor day, with management giving optimistic 2015 revenue and adjusted EBITDA guidance.
- One takeaway is that management expects Groupon's goods margins to expand going forward.
- Another takeaway is that management expects revenue growth to accelerate to 20% by 2017.
- Groupon's business model has been restructured to combat previous flaws.
- The recovering world economy, along with the holiday season could mean a profitable future for Groupon if it continues on its current trajectory.
- The stock price could see additional upside after Q4 results.
Still No Light At The End Of The Tunnel For Groupon?
Recent Moves By Groupon Can Help It Sustain Newly-Found Momentum
- Groupon surprised Wall Street by delivering a bottom line beat.
- It plans to roll out Gnome aggressively to provide a real-time network to customers and merchants.
- Groupon is improving its distribution and launching mobile apps to attract more users to its platform.
- Groupon earnings were a mixed bag, with top/bottom line beats and guidance weak.
- Groupon may need a new product category to be solidly profitable. With Groupon's large user base and fortress balance sheet, this could be doable.
- Ultimately, given the high valuation, Groupon is still a speculative stock.
- Groupon reported better than expected earnings, but guidance was a bit light.
- This report is in line with my expectations and I don't think the reward is worth the risk in betting on GRPN in either direction.
- I previously discussed how although Groupon is maintaining nice top line growth, its margins would deteriorate with an influx of competition.
- Groupon, Inc. (GRPN) is slated to report 3Q 2014 earnings after the bell on Thursday, October 30th.
- Earnings Per Share Excluding Items: Company guidance is a range of $0.00 to $0.02. The current Street estimate is $0.01 (range -$0.01 to $0.02).
- Revenues: Company guidance is a range of $720 mln to $770 mln. Analysts expect an increase of 25.8% y/y to $748.76 mln (range $733.0 mln to $792.19 mln).
- Till the end of August, 2014, GRPN fell by 40% over 12 months. Since then, it has recovered by 22%, largely because of the company's new offerings.
- In the previous quarter, a 44% y-o-y increase in the number of bookings was reported by the company and 6% of its total revenue came from the travel segment.
- The negative brand image, along with the intensity of effort needed by the company to ensure regular sales, can cause the company to lose out financially in the future.
- At present, it looks like the company has been taking sufficient steps to ensure that it counters the issues that led to the initial decline in its stock price.
- However, the company needs to shift from its "push strategy" when it comes to sales and encourage subscribers to search for deals themselves, instead of relying completely on company emails.
Why Groupon Will Be One Of The Main Beneficiaries Of The iPhone 6
- Apple's Payment system is a game-changer for the mobile payments space.
- Companies who have a very big footprint in the mobile commerce space, will benefit going forward.
- And Groupon being one of the largest mobile commerce companies in the world, will benefit more than most.
- Groupon has taken a beating in 2014, but the company's strong growth and impressive fundamentals cannot be ignored.
- Groupon is seeing rapid growth in mobile and it is making its platform better for both merchants and users by introducing products like Pages and Gnome.
- Groupon is undertaking moves to improve margins, while a drop in the number of unused coupons indicates that its business is gaining traction.
- Groupon announced its new time-specific coupons on Wednesday.
- The innovative deal strategy should give it an edge over competition.
- As more consumers begin using Groupon, free cash flow and the company's share price should drastically rise.
Groupon Appears To Be On The Mend, But Investors Lack Conviction
- The net loss for the six months ending June 2014 widened to $60 million from only $11 million last year, due to lower operating margins.
- The company’s lack of profitability coupled with a continuous decline in margins is its greatest impediment to establishing a sustainable uptrend.
- Groupon GAAP EPS is still expected to come out negative in Q3 2014.
- Groupon posted another mixed quarter leading to an initial 18% selloff in the stock.
- The company does have a couple interesting initiatives given its push to mobile, but will it be enough?.
- Given the amount of marketing spend and sales force required to sustain revenues, Groupon's future remains cloudy.
- Lowered outlook paints a clear picture of Groupon's unsustainable business model.
- Increasing competition will hurt Groupon.
- Even after losing almost 50% of its market cap, Groupon is still not an acquisition target.
- Increasing short interest is another negative.
- Groupon is a strong sell.
Groupon Looks Well Positioned; Lack Of Earnings Is A Symptom Of An Investment Year
- Mobile growth is a strong indicator for future success.
- New initiatives like genome and pages lead to cross-sell opportunities, and ecosystem benefits.
- Earnings are deflated due to an investment year.
- Free-cash-flow should improve as a result of closing non-performing segments, paired with greater economies of scale.
Why Groupon Could Be A Good Investment At 52-Week Lows
- Groupon might be beaten down, but the company is doing well to grow revenue.
- Groupon's strategies look sound, and could help it reduce expenses and improve the bottom line going forward.
- Groupon's focus on mobile and new products can be catalysts in the long run.
- Groupon's strong cash position and earnings growth expectations make it an enticing bet at 52-week lows.
Flat Revenue Growth Quarter Over Quarter, Deteriorating Operating Leverage Make Groupon A Sell
- Groupon's gross margin and profitability have declined under its new ecommerce strategy.
- The company lacks the scale to compete with the likes of eBay or Amazon. With flat revenue growth Q/Q, there is no guarantee the company will reach that scale.
- Despite a greater than 15% decline in the stock since Q2 earnings, the stock has further room to fall.
Dec. 10, 2013, 1:34 PM
- Though still generally below their mid-October highs, Internet momentum stocks are turning in what might be their best performance during a rally that has now lasted two weeks. While Twitter (previous) is the star of the show, Facebook (FB +3.5%), Yelp (YELP +1.8%), Groupon (GRPN +4.7%), Netflix (NFLX +2.1%), LinkedIn (LNKD +1.4%), and Pandora (P +3.4%) aren't getting left out.
- Several Chinese Internet names are also higher. In addition to Baidu, which is benefiting from a bullish Pac Crest note, Sina (SINA +6%), Ctrip (CTRP +6.1%), Qunar (QUNR +6.3%), and Youku (YOKU +3.9%) are staring at big gains.
- Morgan Stanley's Scott Devitt is out with another bullish note on Groupon. Devitt notes an MS survey of 358 SMBs found only 26% of merchants have run Groupon deals in the last 12 months, something he thinks suggests there's "a long run way of merchants" that can still be signed up.
- He also sees room for Groupon to improve its customer targeting - the company still isn't able to track which deals were shown to customers, or were clicked on, in prior e-mails - and expects its new site (allows deals to be browsed without an e-mail address being given) and a revamped e-mail layout to boost growth.
Dec. 3, 2013, 9:32 AM
- Groupon (GRPN +3.7%) reports its North American billings for the four-day Thanksgiving weekend were up 30% Y/Y. The company adds 55% of those transactions took place via mobile devices. (PR)
- The billings growth rate is soundly above the 20% North American gross billings growth Groupon reported for Q3, and even with the 30% clip it reported for Q2. The share of N.A. transactions coming via mobile appears to be up slightly from Q3, during which time mobile accounted for "over 50%" of buying activity.
- Amazon and eBay also saw strong weekend sales.
Dec. 2, 2013, 9:49 AM
- Groupon (GRPN -5.4%), OpenTable (OPEN -5%), and Trulia (TRLA -5.4%) have been cut to Neutral by Goldman.
- Sprint (S -2.3%) has been cut to Neutral by Macquarie.
- Rackspace (RAX +3.4%) has been upgraded to Outperform by Raymond James.
- Avago (AVGO +2.7%) has been upgraded to Buy by DA Davidson.
- Marketo (MKTO +7.3%) has been added to Goldman's Conviction Buy list.
- Ruckus (RKUS +3.1%) has been upgraded to Buy by Goldman.
- Palo Alto Networks (PANW -3.2%) has been cut to Outperform from Strong Buy by Raymond James.
- American Superconductor (AMSC -2.5%) has been cut to Neutral by Ascendiant Capital.
- Fairchild (FCS -4.2%) has been cut to Market Perform by Raymond James.
- Tableau (DATA -1.8%) has been started at Sector Perform by RBC.
Nov. 20, 2013, 3:13 PM
- Silver Lake has hired investment banks to lead a potential IPO of payment processing company Mercury Payment Systems, reports Reuters. The news comes not far behind reports competitor Square is exploring an IPO.
- A source says the Mercury IPO could come in 2014 H1 and the company could be valued at $2.5B - a funding round last year valued Square at $3.25B. Mercury booked revenue of $203M in 2012 vs. Square's expectation of $550M this year.
- Silver Lake purchased about 60% of the company in 2010, leaving founders Marc and Jeffrey Katz and existing investor Larry Stone owning the remainder.
- Other competitors include: EBAY (PayPal), GRPN, INTU, and PAY.
Nov. 19, 2013, 10:39 AM
- Groupon (GRPN -4.3%) chairman Ted Leonsis discloses he recently made a series of sales from Nov. 11 to Nov. 18. The sales are tied to the exercising of stock options featuring a $0.05/share purchase price.
- Leonsis still owns 793.5K shares of Groupon, which is up 104% YTD thanks in part to positive earnings news and optimism about the company's efforts to transform into a broader provider of e-commerce goods and long-term deals.
- Groupon recently opened up its first warehouse, a Northern Kentucky facility that will act as "the primary fulfillment center" for Groupon Goods.
- Previous: Groupon looking to buy warehouses, take on Amazon
Nov. 11, 2013, 11:35 AM
- comScore estimates U.S. PC e-commerce sales rose 13% Y/Y in Q3 to $47.5B. That's down from Q2's 16% clip, and matches Q1 2013 for the slowest pace seen in the last two years.
- But the firm also believes U.S. mobile e-commerce sales rose 26% to $5.8B. That's a pickup from Q2's 24% clip, and gives mobile an 11% share of total U.S. e-commerce spend. comScore thinks mobile sales will be near $9B (+25% Y/Y) in seasonally strong Q4, and have "an outside shot of hitting $10 billion." 62% of Q3 mobile spending is believed to have come from smartphones, and 38% from tablets.
- Recent industry commentary has been mixed. eBay (EBAY -0.4%) provided light Q4 guidance while stating U.S. e-commerce growth was slowing, but the company partly backtracked on its comments. Groupon (GRPN -2.8%) partly blamed its Q3 revenue miss on seasonal weakness, but is optimistic about holiday season demand. Amazon (AMZN +0.7%), which has been gaining U.S. e-commerce share for some time (Q3 North American sales +31% Y/Y), has been fairly upbeat.
- Other firms with strong U.S. e-commerce exposure: OSTK, ECOM, SALE, NILE, FUEL.
Nov. 8, 2013, 1:12 PM
- 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.
- More on Groupon
Nov. 7, 2013, 6:02 PM
Nov. 7, 2013, 4:46 PM
- Groupon (GRPN) had Q3 gross billings of $1.34B (+10% Y/Y). The company's take rate (revenue/billings) was 44.4%, up from 43.2% in Q2 and 42.7% in Q1.
- Though Groupon expects "strong holiday sales interest," Q4 results are expected to be pressured by "e-mail headwinds," as well as "marketing initiatives" to promote Groupon's deals/goods marketplace (previous).
- Q3 gross margin was 60.4%, -280 bps Q/Q and -760 bps Y/Y, as the company's shift towards direct/e-commerce sales continues having an impact.
- North American sales (61% of total) +24% Y/Y, a slowdown in growth from Q2's +45% and largely responsible for the Q3 miss. EMEA sales -21% after dropping 24% in Q2. Rest of world -4%, better than Q2's -26%.
- EMEA revenue fell even though Groupon's billings to the region rose 12%; that implies a major take rate drop. North American take rate rose slightly.
- Third party and other revenue (deals-focused) -7% Y/Y to $394.9M after dropping 17% in Q2. Direct revenue (e-commerce-focused) +38% to $201M; that's a big slowdown from Q2's 190% clip.
- Marketing spend fell again, dropping 25% to $53.3M. SG&A spend +2% to $294.1M. Just $9M was spent on buybacks; Groupon's average price was a steep $11.67.
- GRPN -5.9% AH. Q3 results, PR, slides.
Nov. 7, 2013, 4:07 PM
- Groupon (GRPN): Q3 EPS of $0.02 beats by $0.01.
- Revenue of $595.1M (+5% Y/Y) misses by $20.6M.
- Expects Q4 revenue of $690M-$740M vs. a $723.7M consensus. Expects Q4 EPS of $0.00-$0.02, below a $0.06 consensus.
- Company acquiring South Korean deals provider Ticket Monster from LivingSocial for $260M in cash and stock.
- Shares -7.7% AH. (PR)
Nov. 7, 2013, 11:48 AM
- Even as Twitter blasts off to a $25B valuation following its much-hyped IPO, U.S. and foreign Internet stocks are giving back some more of the massive 2013 gains that have led many names to trade at steep multiples.
- One sign investors in this space are in a profit-taking mood: Zillow (Z -4.3%) and YY both sold off yesterday in spite of delivering Q3 beats (I, II) and above-consensus guidance; Zillow is adding to its losses today. Likewise, SouFun (SFUN -5.4%) has turned negative after providing a Q3 beat and strong guidance.
- Notable U.S. decliners: FB -2.4%. LNKD -2.8%. GRPN -4.7% (reports after the close). ZNGA -2.7%. P -3.8%. TRLA -5.4%.
- Notable foreign decliners: BIDU -2.4%. QIHU -6.7%. SINA -5% (generally viewed as the Chinese Twitter). DANG -6.2%. VIPS -7.7%. RENN -4.2%. AMAP -4.7%. CTRP -5.7%. YOKU -5.6%. RENN -4.2%. YNDX -5.1%. MELI -2.4% (plunged yesterday thanks to a Q3 miss). SIFY -2.6%.
- Internet/social media ETFs: FDN, PNQI, SOCL
Nov. 7, 2013, 12:10 AM
- ADES, ADUS, AIRM, AL, ALJ, ANAC, ARAY, AREX, ARNA, ATLS, ATW, AUQ, AVG, BCEI, BEBE, BIO, BNNY, BPZ, CFN, CLNE, CUBE, DAR, DIS, DMD, EAC,EBS, ECPG, ELON, ENOC, EZPW, FEYE, FF, FUEL, FXEN, GERN, GRPN, GXP, HTGC, IL, KRO, KTOS, LCI, LFVN, MCP, MDRX, MITK, MNST, MNTX, MSCC, NES,NFG, NKTR, NOG, NVDA, OCLR, OLED, PCLN, PEGA, PODD, RNDY, SF, SGMS, SLXP, SNTS, SQNM, SWIR, TSRO, TUMI, UBNT, UNXL, VVC, WIFI, WR, WTR, XNPT, XTEX, YRCW
Nov. 6, 2013, 5:35 PM
- ADES, ADUS, AIRM, AL, ALJ, ANAC, ARAY, AREX, ARNA, ATLS, ATW, AUQ, AVG, BCEI, BEBE, BIO, BNNY, BPZ, CFN, CLNE, CUBE, DAR, DIS, DMD, EAC,EBS, ECPG, ELON, ENOC, EZPW, FEYE, FF, FUEL, FXEN, GERN, GRPN, GXP, HTGC, IL, KRO, KTOS, LCI, LFVN, MCP, MDRX, MITK, MNST, MNTX, MSCC, NES,NFG, NKTR, NOG, NVDA, OCLR, OLED, PCLN, PEGA, PODD, RNDY, SF, SGMS, SLXP, SNTS, SQNM, SWIR, TSRO, TUMI, UBNT, UNXL, VVC, WIFI, WR, WTR, XNPT,XTEX, YRCW
Nov. 5, 2013, 3:02 PM
- comScore estimates LivingSocial, once viewed as a major threat to Groupon's (GRPN -3.2%) daily deals hegemony, saw a 42% Y/Y drop in U.S. PC unique visitors in September to 4.6M, and a 28% drop in mobile uniques to 7.7M. By contrast, comScore thinks Groupon's U.S. PC uniques fell only 8% to 12M, and that its mobile uniques soared 66% to 33M.
- LivingSocial doesn't deny it has seen a traffic drop; the company partly attributes the decline to a well-publicized hacking incident, and lower marketing spend on certain daily deals program as it tries to follow Groupon's lead in offering a "marketplace" of longer-term deals.
- In its Q3 10-Q, Amazon, which owns 29% of LivingSocial, reported the company had revenue of $384M (-1% Y/Y) over the first nine months of 2013, and a net loss of $107M. LivingSocial has been cutting headcount in an effort to pare its losses.
Nov. 4, 2013, 10:44 AM
- Goldman's Heath Terry predicts Groupon (GRPN +5.8%) will post Q3 revenue of $620M and CSOI of $51.6M when it reports on Thursday. Those figures compare favorably with guidance of $585M-$635M and $20M-$40M, and consensus estimates of $515M and $41M.
- Terry thinks Groupon's traffic was "robust in 3Q on both desktop and mobile," and sees the company's "critical mass of users and merchants" giving it "a meaningful advantage" to address a giant local commerce opportunity.
- Terry's view contrasts greatly with ITG Research's. ITG stated on Oct. 22 Groupon's Q3 estimates are at risk thanks to slowing North American billings growth.
- Previous: Groupon rallies after site, apps overhauled
Nov. 1, 2013, 12:08 PM
- The latest changes to Groupon's (GRPN +6.2%) site and apps are an extension of the company's ongoing efforts to transform from a mere provider of daily deals (largely monetized via e-mail) into a "marketplace" for personalized deals (many of which are long-term) that users frequently browse and search through.
- A list of personalized deals (based on prior user activity) now appears on Groupon's homepage, and a prominent search bar appears on every page. Groupon's search tools have been updated to include filters and auto-suggestions, as well as a wider variety of deals.
- Groupon has also updated its mobile apps to include the search and personalized deal changes, and has added a Local Explorer feature that sends deals based on a user's location.
- Direct e-mail now accounts for less than 40% of Groupon's North American transactions, and mobile accounts for nearly 50%. Q3 results are due on Nov. 7.
GRPN vs. ETF Alternatives
Groupon Inc Groupon Inc provides a local e-commerce marketplace that connects merchants to consumers by offering goods and services at discount. The Company features a daily deal on the best stuff to do, see, eat, and buy.
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