Groupon (GRPN): Slow and Uncertain Turnaround; Reiterate Underperform - RBC

RBC Capital analyst, Mark Mahaney, reiterated his Underperform rating on shares of Groupon, Inc. (NASDAQ: GRPN) after revenue of $756MM was 6% above Street, while EBITDA of $34MM was 48% above Street. The analyst believes GRPN has made progress against its core goals but this turnaround will be slow and the outcome highly uncertain.

Keys to the quarter:

1)Relatively Consistent Gross Billings Trends – Total Billings declined 2% Y/Y (ex-FX) to $1.5B in Q2, vs. -3% growth in Q1. North America Billings growth of 8% marked a 3-pt acceleration vs. 5% Y/Y in Q1 on a 2-pt easier comp, tho still below double-digit level seen in 2015

2)Revenue Trends – Grew 3% Y/Y (ex-FX) to $756MM, vs. 1% Y/Y decline in Q1. North America growth rates also improved, accelerating 3-pts (to 7% Y/Y) on a 3-pt tougher comp

3)Active Customer Trends – GRPN added 1MM NA Active Customers (to 27.9M), marking two consecutive quarters of 1M net adds, tho the surge is largely due to an incremental $44MM in marketing & order discount spend – Q2 CAC is similar to Q1

4)NA Local Billings Trends – Grew 9% Y/Y, a 4-pt accel from Q1 on a 4-pt easier comp. Q2 marked the fastest growth in NA Local Billings in 5 quarters.

The company raised its 2016 Revenue/EBITDA guidance to $3.0-$3.10 billion (from $2.75B-$3.05B) and $140MM-$165MM (from $80-$130MM), respectively.

price target of $4.00 (from $3.00)

For an analyst ratings summary and ratings history on Groupon, Inc. click here. For more ratings news on Groupon, Inc. click here.

Shares of Groupon, Inc. closed at $3.78 yesterday.

You May Also Be Interested In

• Amazon.com (AMZN) PT Raised to $215 at UBS
• Equity Residential (EQR) PT Raised to $69 at RBC Capital
• Sherwin-Williams (SHW) PT Lowered to $370 at RBC Capital