Groupon (GRPN) Going to $2 after Dismal Results - Evercore

November 9, 2012 9:23 AM EST
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Price: $3.56 -0.56%

Rating Summary:
    11 Buy, 20 Hold, 6 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 9
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Evercore Partners analyst Ken Sena slashed his price target on Groupon, Inc. (NASDAQ: GRPN) from $3 to $2 following dismal Q3 results after the close. He reiterated his Underweight rating.

The firm notes Flat q/q revenue growth was 5% below expectation at $569 mm. Daily Deals revenue of $424 (75% of business) was down -16% q/q, 17% below their $506 mm estimate. EBIT was $25 mm, $5 mm higher than $20 million estimate (3.3% of rev), but 40% below the Street at $35 mm. However, EPS of $0.03 was in-line with EVR / Street estimates of $0.02 / $0.04 on lower than expected taxes.

Direct revenue (where 1P Goods are booked) increased 122% q/q to $145.0 million in 3Q12, vs. our $90 mm est., driving COGS as a percentage of revenue from 23.8% in 2Q12 to 32.0% vs. our 26.6% estimate.

International revenues were up 3.1% y/y (+13% y/y x-FX) to $277 mm, or down 10% q/q, which missed our $314 mm estimate by 12%.

The firm reduced 2013 EBITDA estimate for Groupon from $260 million to $176 million on the expectation for higher COGS from 1P Goods and slower growth from higher margin Daily Deals. "Given the stronger growth from Goods, we now see Goods contributing $1.4 billion in revenue (~48% of billings) in 2013, vs. our previous estimate of $678 million. Meanwhile, we now expect $3.9 billion in Daily Deal Gross Billings versus $5.4 bn previously (-17% y/y vs. +3.7% y/y)."

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 $3.92 yesterday.

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