Back to top

Analyst Blog

Daily deals provider Groupon Inc. (GRPN - Free Report) continues to exit international markets as a part of its restructuring plans. Fave platform developer KFit Group – which acquired Groupon Indonesia in August – recently acquired Groupon Malaysia. However, financial terms of the transaction were not disclosed.

Last September, Groupon announced the restructuring plan under which it not only started reducing headcount in North America but also exited certain international markets. Over the last nine months (ending Sep 30, 2016), Groupon ceased operations in six countries within its Rest of World segment and 11 countries within its Europe, the Middle East and Africa (EMEA) segment.

The exit from non-core markets is expected to aid Groupon focus on its key growth areas. The company now operates in 26 countries across the globe, down from 47 countries that it operated in the beginning of 2015. Groupon further plans to exit 11 non-core countries going ahead.

Further, the shopping business (Groupon Goods) has being restructured with the lower-margin (specifically empty calories products) being de-emphasized to increase focus on higher-margin healthy food offerings.

The positive effect of the restructuring plan has started reflecting in financial results. Groupon’s third-quarter 2016 adjusted loss (including stock-based compensation and tax impact) of 6 cents per share came in narrower than the Zacks Consensus Estimate of a loss of 8 cents.

Revenues of $720.5 million beat the Zacks Consensus Estimate of $708 million and inched up 1% on a year-over-year basis. Notably, North America revenues increased 4.2% from the year-ago quarter, driven by higher billings (up 10%) and local revenue (up 8%).

Moreover, the stock-price has surged significantly on a year-to-date basis. Groupon’s share price has increased almost 30% as compared with Zacks Electronic Commerce Industry’s gain of 10.7% during the period.

GROUPON INC Price

We believe that the successful execution of the restructuring plan will ensure strong top-line growth for Groupon going ahead. The company’s focus on reducing cost will eventually improve its margins and profitability.

However, higher investments on marketing spend can impact its financials in the near term. Moreover, Groupon Goods face stiff competition from giants like eBay (EBAY - Free Report) and Amazon.com (AMZN - Free Report) , which is a headwind.

Zacks Rank & Key Picks

Currently, Groupon has a Zacks Rank #2 (Buy). Stamps.com (STMP - Free Report) is a better-ranked stock sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stamps.com’s long-term earnings growth rate is currently pegged at 17.5%.

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>