Eleven consecutive quarters of declining revenue attest to Groupon Inc. (NASDAQ:GRPN) poor show in the market. In the recent quarter, the company reported mixed financial results depicted by revenue miss as net profit beat estimates.
The stock is already down by more than 40% for the year at the back of a ferocious sell-off wave that began at the start of the year. While the company is in transition mode away from coupons and vouchers to new card-linked products, things are not looking any better.
Groupon Price Analysis
Underperformance in the market is a point of concern given that bounce backs in the market have acted as sell-off opportunities. With each bounce back from lower lows, short sellers have come in and continued to push the stock to lower lows in the market.
Groupon is currently flirting with one-year lows and at risk of plunging even further, given the strength of the downtrend. After the recent slump, the stock faces immediate support at the $2.80 mark. A sell-off followed by a close below the critical support level would leave the stock susceptible to further declines with the $2 a share mark emerging as a possible stop.
Groupon needs to rise and stabilize above the $3.60 mark to avert further slides. However, a rally followed by a close above the $4.50 mark would reaffirm the bullish trend bringing to an end a bearish trend that threatens to plunge the stock to all-time lows.
Why Has Groupon Underperformed?
Earnings Miss Debacle
Groupon has come down tumbling on falling short of Wall Street expectations when it comes to revenue and earnings generation. Warnings that the company might not be able to meet its free cash flow target of $200 million before the end of the year is another headwind that continues to spook the markets.
A slump in revenue generation comes on Groupon bowing out of unprofitable countries. Scaling down low margin Groupon goods merchandise sales has also continued to affect the company’s revenue generation capabilities.
Groupon’s vouchers are no longer as popular as they used to be in the past. For instance, the company sold 39.5 million units in the recent quarter representing an 11% year over year decline. The decline saw the company report revenues of $592.9 million compared to consensus estimates of $600 million.
Strategic Alternatives AMC Partnership
In a bid to reinvigorate growth and shrug off the impact of Groupon voucher business decline, the company has started working on strategic alternatives. Enhancing customer experience is top on the agenda as the company also moves to unlock international potential.
Groupon is also considering transitioning into card-linked offers, instead of outdated voucher models as part of the ongoing transition. The company has also raised the bar of its marketplace platform on announcing a distribution partnership agreement with AMC Entertainment
The partnership paves the way for Groupon to expand its presence in local markets across the U.S. For starters, it intends to start providing its customers with better access to movies by leveraging AMCs screens and theaters across the U.S.
Plans are already underway to integrate Groupon’s Marketplace into AMC’s theaters in the first half of the year. The new alliance should help boost the company’s customer base in North America a key market that drives the top line. The deal could also bring the company closer to becoming a much more frequented platform for consumers, a key to generating revenues.
2018 has been a brutal year for Groupon depicted by a 40% plus slide in the stock price. The underperformance is a point of concern as the company has registered 11 consecutive quarters of declining revenues.
The stock’s sentiments after the recent sell-off can only improve on the company putting to good use its cash-rich balance sheet. The signing of strategic partnerships like the one with AMC should also come into play if the company is to reinvigorate investor’s sentiments to avert a further slide of the stock.