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Bull of the Day: Groupon (GRPN)

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Groupon (GRPN) hasn't gone away, just the opposite. The coupon service has re-invented itself. This Zacks Rank #1 (Strong Buy) recently raised its full year outlook.

Groupon operates a mobile app and online marketplace where customers can save on things to do, eat, see and buy. That includes deals on local businesses, travel, consumer products and live events.

A Beat in the First Quarter

On May 9, Groupon reported its first quarter results and beat the Zacks Consensus by 3 cents. Earnings were 3 cents versus the Consensus of zero.

Revenue actually fell 7% to $626.5 million but this was in line with the company's strategy to maximize gross profit.

Gross profit rose 5% in the quarter to $324.9 million, led by growth in International.

In North America, it has 32.6 million active customers and the trailing 12 month gross profit per active customer rose 1%.

It has over 4.2 million cards linked in Groupon+, its voucherless initiative that is linked to credit cards. Additionally, it launched American Express with the program to increase customer choices of cards.

In International, active customers rose to 17 million as of Mar 31. The trailing 12 month gross profit per active customer increased 9%.

Share Repurchase Program

The company is shareholder friendly as it just completed a share buyback program and the Board of Directors approved a new $300 million program.

Groupon is also cash rich. It still has $725.9 million in cash and has no outstanding borrowings on its $250 million revolving credit facility.

Raised Full Year Guidance

Given the strong first quarter, the company raised its full year outlook.

The analysts all raised their estimates too, with 9 rising and just 1 being cut for 2018 in the last month.

The 2018 Zacks Consensus Estimate jumped to $0.23 from $0.20 in that time period. That's earnings growth of 109% as the company only made $0.11 in 2017.

The analysts are also bullish on 2019 with 8 estimates higher and 1 lower over the last month. Earnings are expected to grow another 14.6%.

Shares Still Weak- A Buying Opportunity?

The shares spiked higher on the earnings report but couldn't hold the gains. They're still down 9.2% year-to-date.

Is this a buying opportunity?

Groupon now trades with a forward P/E of 20.5. While that's not cheap, it has a P/S ratio of 1.0 which is low.

Groupon is changing its business model with the times and that's showing up in its improved earnings and profits.

For investors looking for a hidden social media company with growth, Groupon is one to keep on the short list.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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