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Groupon (GRPN) to Report Q1 Earnings: What's in the Offing?

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Groupon’s (GRPN - Free Report) first-quarter 2020 results are likely to reflect impact of intense competition in Groupon’s Goods category, weak consumer sentiment, and customer shift toward lower margin Local offerings.

The Zacks Consensus Estimate for first-quarter earnings is pegged at a loss of 7 cents per share, which widened from loss of 4 cents in the past seven days. Notably, the company had reported earnings of 3 cents in the year-ago quarter.

For revenues, the consensus mark stands at $400.2 million, suggesting a decline of 30.8% from the year-ago reported figure.

Factors to Note

Groupon’s first-quarter performance might reflect impact of coronavirus-induced shutdowns. The lockdowns have put a cap on events, conferences, and other social events, which may have impacted adoption of Groupon Select membership program (for a monthly subscription of $4.99), Universal Cart and Guest Checkout products. This, in turn, is expected to have weighed on the first-quarter performance.

Groupon Inc Price and EPS Surprise

Groupon Inc Price and EPS Surprise

Groupon Inc price-eps-surprise | Groupon Inc Quote

During the quarter under review, Groupon announced a plan to exit the Goods category and focus on local experiences marketplace (includes Things to Do, Beauty & Wellness, and Dining). Groupon plans to exit the Goods category in North America by third-quarter 2020 and globally by the end of the year.

Markedly, the daily deals website company has been trying to reduce dependence on Goods deals and is shifting focus toward local services market of late. This transition to high margined local services market has been hurting the company’s revenues.

Notably, the Zacks Consensus Estimate for total North America billings currently stands at $521 million, compared with $767 million reported in the fourth quarter.

Further, increasing investments on brand rebranding and product enhancements might have limited margin expansion in the first quarter.

Nevertheless, Groupon has been focused on initiatives to bolster card linked offers and improve mobile experience and real-time bookability. The company’s evolving voucherless strategy intends to provide customers with enhanced experience and increased conversion across the United States. These initiatives are expected to have driven North America local gross billings in the first quarter.

Additionally, partnerships with Grubhub, ParkWhiz, among others, and ongoing brand awareness programs are expected to have contributed to active customers count. Thereby, these deals may have benefited the first-quarter performance.

Notably, as of Dec 31, 2019, the company had approximately 26.5 million active customers based in North America.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Groupon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Groupon has an Earnings ESP of -35.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few stocks that you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat.

BJs Wholesale Club Holdings Inc (BJ - Free Report) has an Earnings ESP of +6.42% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Anaplan Inc (PLAN - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank of 1. 

NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +0.15% and a Zacks Rank #2.

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