Groupon’s Q1 Weakness Likely To Remain In Q2, But The Outlook For The Year Isn’t All Bad

Groupon (NASDAQ:GRPN) reported its Q1 earnings earlier this week, and the company beat consensus estimates on revenue and earnings. Groupon continues on its path of transformation towards an e-commerce platform while focusing its efforts on higher value customers. While the strategy has led to sustained customer losses over recent quarters, the company’s management maintains that the near-term weakness is likely to pave the way for long-term value. While the management guidance estimates an adjusted EBITDA of $270 million in 2019 and $300 million in 2020, investors will be closely watching whether the source of this profit growth over subsequent quarters is an improvement in revenues, or merely cost savings.

Per Trefis estimates, Groupon’s shares have a fair value of $4, which is roughly 10% ahead of the current market price. Our interactive dashboard on Groupon’s Price Estimate outlines our forecasts and estimates for full-year 2019. You can modify any of the key drivers to visualize the impact of changes on its valuation. Additionally, you can see all of our Internet and Technology company data here.

Trends In Groupon’s Revenues Over Recent Quarter, And Our Forecast For Full-Year 2019

• North America Revenues: Groupon’s North American Revenues declined to $357 million (-9% y-o-y) due to lower customer traffic. This can be attributed to a reduction in active customer count to 29.6 million now from 32.6 million a year ago. However, the company is working on a couple of initiatives that should help the top line recover over subsequent quarters – something we believe will result in revenues for full-year 2019 reaching the level seen in 2018. Groupon’s ongoing initiatives include:
  • Moving its customer acquisition avenues away from email and search engine optimization towards a partnership driven model
  • Adjusting its marketing programs to capture a larger portion of high-value customers while allowing high attrition rates among its lower value customers
• International Revenues: Groupon’s International Revenues declined to $221 million (-5% y-o-y). However, the active customer count grew to 17.5 million from 17.0 million a year ago, and we expect steady improvement in customer count over the rest of the year to help these revenues increase ~5% for full-year 2019.

We forecast Groupon’s EPS figure for full-year 2019 to be $0.42. Taken together with our forward P/E multiple of 9.6 for the company, this works out to a $4 price estimate for the company’s stock, which is around 10% higher than the current market price.

Do not agree with our forecast? Create your own price forecast for the Groupon by changing the base inputs (blue dots) on our interactive dashboard.