Groupon Inc Common Stock (NASDAQ:GRPN) is a stock we have covered from a very skeptical perspective in the past. As we see it, there simply is a lack of a viable business model here. The price target is $0/share. That is our perspective. Keep that in mind as we cover the company’s earnings. To contextualize that idea, here is our argument in brief.
GRPN can never cultivate a return on investment from a brand perspective. Merchants are looking for a short-term splash through Groupon, and customers are simply looking for the largest discount they can find. Hence, neither will ever value Groupon doing a good job as something more valuable than a one-off instance. Brand loyalty is impossible for Groupon. That makes every dollar invested by the company worth no more than $1. No company can really survive indefinitely under such circumstances.
Groupon Inc Common Stock (NASDAQ:GRPN), in addition, lives in a world where it has very strong competition if it ever does well. Both Google and Amazon have segments that will outcompete Groupon any time the business of offering one-off sharp discounts is providing some kind of value-add margin level (which, in itself, is rather difficult to envision except under strange circumstances).
The street, knowing all of this, will never assign a premium to shares, and only grant it any leeway under exceptional operational execution streaks, which are unlikely at any given time, at best.
Such is the context in which an investment in GRPN shares must exist. With that said, how did the company do in Q3?
The company reported Q3 (Sep) earnings of $0.08 per share, $0.05 better than the S&P Capital IQ Consensus of $0.03; revenues fell 6.6% year/year to $592.9 mln vs the $602.08 mln S&P Capital IQ Consensus. So, a bottom line beat and a top line miss.
Adjusted EBITDA, a non-GAAP financial measure, was $56.4 million in the third quarter 2018, up 21% from $46.6 million in the third quarter 2017. For the full year 2018, Groupon continues to expect Adjusted EBITDA to be between $280 million and $290 million.
Not bad. But shares dropped hard on the results. Again, we believe this is because of an assumption of an inevitability for eventual failure here. And a pointlessness of a long term ascension into a genuine growth ladder.
“We delivered a profitable quarter and continued our established track record of Adjusted EBITDA growth,” said Groupon CEO Rich Williams. “As we celebrate our 10th birthday, we’re excited to keep advancing our key strategic priorities to continue to grow and develop our marketplace as the daily habit in local commerce.”
Satellite Imagery
Groupon Inc Common Stock (NASDAQ:GRPN) trumpets itself as a company that operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount in North America and internationally.
The company provides deals in various categories, including events and activities, beauty and spa, health and fitness, food and drink, home and garden, and automotive; and deals on various product lines, such as electronics, sporting goods, jewelries, toys, household items, and apparel, as well as provides discounted and market rates for hotel, airfare, and package deals.
It offers its deal offerings to customers through Websites; search engines; mobile applications and mobile Web browsers, which enable consumers to browse, purchase, manage, and redeem deals on mobile devices; emails; affiliate channels; display advertising; and television and radio advertising.
The company was formerly known as ThePoint.com, Inc. and changed its name to Groupon, Inc. in October 2008. The company was founded in 2008 and is headquartered in Chicago, Illinois. Groupon, Inc. is a subsidiary of The Point, LLC.
Groupon Inc Common Stock (NASDAQ:GRPN) generated sales of $617.4M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -1.5% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($675.7M against $918.8M, respectively).