Online daily deals provider,
), declined 6.1% (68 cents) to close at $10.40 on Feb 11, 2014,
after it filed an 8K to notify the resignation of its product
chief, Jeff Holden.
Jeff Holden is known for his deep understanding of consumer
behavior, which is significantly important for a
consumer-oriented company like Groupon. The company is undergoing
a transition from a mere daily deals provider to a broader based
e-tailer and the departure of this key executive can hurt the
product development process in the near term.
Nevertheless, we believe that the sell-off reflected growing
concerns about the company's upcoming fourth-quarter results. The
company is set to announce fourth-quarter results on Feb 20,
2014. Groupon forecasts revenues in the range of $690.0 to $740.0
million. The company expects the bottom line to range from
breakeven to earnings of 2 cents per share.
Currently, the Zacks Consensus Estimate is pegged at a loss of 1
cent, which is lower than the company's guided range. Moreover,
the mid-point of the revenue guidance range is slightly lower
than the Zacks Consensus Estimate for revenues.
However, we believe the strong holiday season sales will boost
Groupon's fourth-quarter results. Billings were up 30.0% from the
year-ago period, during the four-day holiday weekend in Dec 2013.
Moreover, Groupon's policy of launching new products on a regular
basis and the growing popularity of its mobile app continues to
attract consumers. The company noted that more than 50%
transactions (55.0% of North America) in the holiday season were
carried out through mobile devices.
We believe Groupon is well positioned to gain from the rising
e-Commerce spending on mobile devices, a profitable domestic
market and an expanding international market.
Although mobile presents ample growth opportunity, increasing
competition from established players such as
) as well as small companies like
) remains a major concern.
We also note that the barriers to entry into the daily deals
market are quite low, which will attract new entrants, going
forward. Hence, to remain competitive, Groupon will be forced to
continue investments to expand its merchant base, which will hurt
profitability, going forward.
Currently, Groupon carries a Zacks Rank #3 (Hold).
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