Groupon (GRPN) Losing Money for the Forseeable Future - Cowen
Groupon (NASDAQ: GRPN) revenue is expected to be down in FY16, to $2.75-3.05B, vs. $3.0-$3.1 in FY15, driven primarily by a potential decline of $250M y/y in Shopping. As Groupon faces increasing pressure, the founder and CEO is stepping down to make room for a former executive from Amazon, Rich Williams. Cowen analyst, Kevin Kopelman, has an Underperform rating on the company and documented the issues in an earnings review note:
Management changes: Rich Williams, formerly COO, was named CEO and Eric Lefkofsky moves to Chairman. Rapidly climbing a falling ladder, Williams joined Groupon in 2011 as SVP of Marketing, became President of N. America in 2014, was named COO in June 2015 and is now the CEO. Lefkofsky, Groupon co-founder and largest shareholder, is stepping down as CEO and returning to his previous role as Chairman of the Board.
Williams is significantly increasing marketing investment, streamlining international operations, and reducing low-margin inventory in Shopping. However, this plan isn’t cheap. Groupon lowered FY16 EBITDA guidance by 70% vs. the Q2 call. New FY16 guidance is for $75-125M in EBITDA, vs. $334M one quarter ago.
The way management intends to track the success of this increased spending is through billings growth. Management projects acceleration during FY17, driving North American billings growth to 20% by FY18, vs. 12% in Q3:15.
No change to the Underperform rating, target price revised down to $2.25 (from $2.75).
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Shares of Groupon, Inc. closed at $4.03 yesterday.