Groupon Inc. (NASDAQ: GRPN) reported its third-quarter results Thursday after the market closed as $0.03 in earnings per share and $757.1 million in revenue, against Thomson Reuters consensus estimates of $0.01 in earnings per share and $748.76 in revenue. The third quarter from the previous year had $0.02 in earnings per share and $595.06 million in revenue. The company gave guidance for the fourth quarter of $0.02 to $0.04 in earnings per share and $875 million to $925 million in revenue. There are consensus estimates for the fourth quarter of $0.07 in earnings per share and $926.27 million in revenue.
The long and short of the matter is that this was better than expected for the most recent quarter, but this is an effort to lower the bar for the key fourth quarter.
Global units such as vouchers and products sold before cancellations or refunds increased 92% to 88 million year-over-year. Active customers grew 24% year-over-year to 52.7 million, accounting for 23.5 million in North America. Over half of Groupon’s business is done on mobile devices. The mobile mix is fueled by over 100 million people worldwide that have downloaded Groupon mobile apps.
This past quarter, Groupon repurchased over 1.3 million shares of its Class A common stock at an average price of $6.16. The company has repurchased a total of 26 million shares worth $190 million from its existing authorization set in August 2013.
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CEO of Groupon Eric Lefkofsky said:
We had another record quarter, with worldwide billings increasing 39 percent and reaching their highest level ever. We also made significant progress in our strategy to become the leading mobile commerce destination, with double-digit growth in our North American Local business, double-digit gross margins in North American Goods and positive Adjusted EBITDA in every segment for the first time in over a year.
The first-ever investor day in November is likely to have a strong impact on Groupon. The story behind this company is said to have “a lot of moving parts” and is not well understood on Wall Street. This investor day could seemingly clear the air and attract more investors to this company.
Sterne Agee’s Arvin Bhatia and Brett Strauser speculate that the company is trading with a deep discount, compared to its peers, and that if it can focus on a few goals, it will be able to almost double its current valuation. They would go on to say in their report that the goals Groupon needs to focus on are growing its North America Local billings and increasing gross margins in the Goods segment by year-end.
As far as analysts, Brean Capital started it as Buy with an $8 price target (versus a $6.22 close at the time). Sterne Agee issued a Buy rating for Groupon with a price target of $12 on September 19. Credit Suisse reiterated a Neutral rating and lowered its price target to $6.50 from $10.00 on August 6. Deutsche Bank reiterated a Buy rating and moved its price target down to $7.00 from $8.00, also on August 6.
Shares of Groupon closed Thursday up 3.4% at $5.99. Following the release of the earnings report, the initial response in the post market was negative and shares were down around 1% to $5.94. The stock has a consensus analyst price target of $7.30 and a 52-week trading range of $5.18 to $12.42. The market cap is near $4 billion.
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