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Why Is Groupon (GRPN) Down 9.3% Since the Last Earnings Report?

GRPN

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It has been about a month since the last earnings report for Groupon, Inc. (GRPN - Free Report) . Shares have lost about 9.3% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Groupon Q1 Loss Narrower than Expected, Revenues Miss

Groupon reported first-quarter 2017 loss of $0.02 (including stock-based compensation), which was narrower than the Zacks Consensus Estimate of a loss of $0.05. On a reported basis, loss was $0.04 per share, narrower than $0.08 is in the year-ago quarter.

Revenues of $673.6 million missed the Zacks Consensus Estimate of $717.1 million and also declined 3.6% on a year-over-year basis.

Revenue Details

Region-wise, North America revenues decreased 5.5% from the year-ago quarter while International revenues increased 1.3% year over year.

Gross billings dipped 0.9% year over year to $1.36 billion in the quarter. Region-wise, billings from North America jumped 2.9% year over year. However, international billings declined 9.1%.

North America local gross billings of $587.8 million grew 8.9%. Local revenues of $200.5 million grew 4.4% from the year-ago quarter. However, goods billings declined 10.7% and revenues fell 12.3% to $252.4 million.

During the quarter, Groupon reduced its country presence to 15. As of Mar 31, 2017, the company had approximately 48.3 million active customers globally. Groupon added nearly 500K new customers in North America during the quarter. Active customers in North America were 31.6 million at the end of the quarter.

Operating Details

Gross margin contracted 10 basis points (bps) on a year-over-year basis to 45.9% in the quarter. North America gross profit increased 2.3%, while internationally it declined 15%.

Adjusted EBITDA margin expanded 210 bps to 6.6%, reflecting successful implementations of the company’s streamlining initiatives.

Groupon’s operating expenses dropped 9% year over year to $318.39 as SG&A declined 11.8% and marketing expenses declined 1.1%.

Operating loss was $8.9 million compared with a loss of $30.2 million in the year-ago quarter.

Balance Sheet and Cash Flow

As of Mar 31, 2017, Groupon had cash & cash equivalents worth $691 million as compared with $891.8 million as of Dec 31, 2016.

Free cash outflow was $150.3 million as compared with free cash flow of $275.3 million at the end of the previous quarter.

During the first quarter, Groupon repurchased 7,336,681 shares of its common stock for an aggregate purchase price of $26 million.

Outlook

For second-quarter 2017, Groupon expects EBITDA to decline sequentially as the company plans to continue its investments in marketing and offline campaigning activities. However, EBITDA is expected to increase from the year-ago quarter figure of $36 million.

For 2017, Groupon projects gross profit to remain in the range of $1.30 billion to $1.35 billion, an increase of $40 - $90 million from full-year 2016 on an FX neutral basis.

Management also expects to generate revenues of around 2.9 billion for 2017.

Also, adjusted EBITDA is projected to remain in the range of $200-$240 million (for the 11 countries), reflecting an increase of $16 - $56 million over 2016 levels on an FX neutral basis.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

Groupon, Inc. Price and Consensus

 

VGM Scores

At this time, the stock has a nice Growth Score of 'B', however its Momentum is doing a bit better with an 'A'. However, the stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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