Title: Will Groupon's Stock Outshine Market Competitors in the Last Quarters of 2024?
Title: Will Groupon's Stock Outshine Market Competitors in the Last Quarters of 2024?
Now, let's dive into the world of Groupon, the once-popular local experience discounter that's seen a dramatic drop in value. Back in 2014, finding a Groupon voucher in a time capsule was more likely than it is today.
Groupon's stock has plummeted 97% below its split-adjusted all-time high, set when it went public in late 2011. Over the last four quarters, its trailing revenue is a staggering 83% lower than its peak set a decade ago. It's safe to say that the shine has worn off this deal machine.
However, just like an enticing offer on the Groupon app, the price seems too good to ignore. With a dramatic markdown, some may see this as a buyer's opportunity. A desperate seller could be just what the doctor ordered.
The Downpour
Tuesday's financial update wasn't exactly the sunshine Groupon investors were hoping for. After delighting investors with its first year-over-year revenue increase since late 2015, the company reported a decline in revenue again. Revenue dropped 3% to $124.6 million, but let's put this in perspective. This dip represents the smallest negative percentage slide since 2016, excluding its head-turning first quarter.
International operations, which now make up just 21% of the revenue mix, were the main culprit. With a 21% decline, these struggling international markets weighed down a 3% increase in North America. On the bright side, Groupon's flagship local business improved by 7% in North America for the quarter.
Groupon's new guidance suggests that this will be its eighth consecutive year of declining revenue unless it nails the top end of its range. However, the company has been on a journey of transformation, shedding its non-core operations and international markets. This focus shift has started to pay off in unexpected ways.
Groupon's Savings
Groupon is no longer the poster child of Wall Street drama. In fact, there's a lack of coverage, and that's not necessarily a bad thing. One analyst still keeping an eye on the flash sales specialist is Sean McGowan at Roth MKM. He acknowledges the technical glitches that resulted in higher costs for the quarter but believes that Groupon's new management is making the right moves to improve its business. He remains bullish on the stock, even if he did lower his price target from $28 to $26.
The financials have been a mess. Groupon has fallen short of Wall Street's profit targets every quarter over the past year. However, it managed to generate positive free cash flow and adjusted EBITDA in the second quarter. It expects to remain in the black on both fronts for all of 2024.
Groupon has been humbled over the years. It had to declare a confidence-rattling 1-for-20 reverse split early in the pandemic to maintain listing compliance. Even now, it's still winding down non-core operations and cashing out of investments made in better times. This year, it expects its divestments to bring in roughly $90 million, a hefty cash infusion for a company with a market cap of just over $600 million.
Groupon's stock is trading for just 14 times what analysts see it earning next year. The recent update may prompt some slight adjustments, but the turnaround is still in sight. If you're up for a bargain, set your sights on Groupon. You may have to dig deep to find it, but the stock has nearly doubled since the beginning of last year. Looks like there's life in this Groupon yet.
Despite the decline in Groupon's revenue and international operations, some investors see this as an opportunity due to the stock's dramatic markdown. Groupon's focus on shedding non-core operations and international markets has started to pay off, leading to positive free cash flow and adjusted EBITDA. With a market cap of just over $600 million and a stock trading at 14 times next year's earnings, some may find it to be a bargain.