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Bear of the Day: Groupon (GRPN)

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Groupon (GRPN - Free Report) is an app and website that offers daily discount deals. Through its Local Deals, the company acts as a third-party marketing agent and sells vouchers, known as Groupons, which users can redeem against products or services at merchant locations.

How Covid-19 Has Impacted GRPN

Investors were disappointed with Groupon’s first-quarter earnings report back in June. The stock tumbled 9% the morning after the results were released.

Even though the company beat analyst expectations on the bottom line, reporting an adjusted loss of $1.63 per share, revenue of $371 million lagged forecasts.

Gross billings of $526.7 million slumped 31.5% year-over-year, while gross profits plunged 34% to $201 million.

Covid-19 hit overall business hard in March; demand for its vouchers fell drastically, and refund levels soared in the company’s primary goods segment. But Groupon did initiate a restructuring plan at the beginning of the pandemic, and is hoping to save $100 million this year and $125 million in 2021.

"Once fully implemented, we expect our multi-phase restructuring plan to deliver approximately $225 million in annualized cost savings," said interim CEO Aaron Cooper.

Bottom Line

GRPN is now a Zacks Rank #5 (Strong Sell).

Three analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen well over two dollars to a loss of $5.10 per share; earnings are expected to see a triple-digit decline for fiscal 2020.

Groupon reports Q2 earnings after the bell on Tuesday, August 4, so these estimate figures could change afterwards.

Shares have fallen over 40% since its Q1 earnings. The company also recently announced a reverse stock split, which sent many investors to cash out and sell their holdings before the split became effective. GRPN fell more than 12% on that news.

Groupon will likely have a long, hard road ahead of it. According to analysts polled by S&P Global Market Intelligence, the company hasn’t reported a profit in the past two years, and isn’t expected to return to profitability until 2024 at the earliest.

While there’s certainly still consumer and market interest for Groupon’s products, they become a much more difficult sell when the number of coronavirus cases continues to rise and unemployment numbers still rest at historic highs.

Investors who are interested in adding an e-commerce stock to their portfolio could consider Shopify (SHOP - Free Report) , a company that provides commerce platforms for small and medium-based businesses. SHOP is a #2 (Buy) on the Zacks Rank, and shares have skyrocketed almost 170% since March 23.

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