Groupon pops 17.4% following strong Q4 results, but will it last?

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Groupon

Groupon (NASDAQ: GRPN) was one of the big movers before the weekend, with shares rising significantly after the company reporting its much-anticipated Q4 results. While the company already has done reasonably well for itself, Groupon is in the middle of a big business model transition, which is why shareholders were more eager than normal to find out how this most recent quarter fared.

Fourth-quarter revenue came in at $343.1 million, significantly higher than the $304.1 million consensus among Wall Street analysts. Better yet, Groupon reported a nice net profit of $15.1 million, or $0.51 per share, which was almost double the $0.27 expected for the company. At the moment, Groupon has a healthy $851 million in cash sitting on its balance sheet, which is another good sign for the company going forward.

Looking ahead, we believe we will benefit from both COVID-19 recovery and strong execution of our growth strategy focused on expanding our inventory and modernizing our marketplace,” said Groupon interim CEO Aaron Cooper. “These drivers, coupled with a substantially lower fixed cost base should position Groupon for sustainable, long-term profitable growth.”

Groupon first rose to prominence due to offering daily deals to subscribers, becoming one of the fastest grouping companies between 2008 and 2011. However, after a point, businesses found that Groupon listings weren’t resulting in as many repeat customers as originally expected. Since then, Groupon’s stock has steadily crashed from its lofty $500 per share price back around 2010 or so, with the story of Groupon’s rise and fall being repeated across business schools all around the world.

While Groupon management made the decision to change its business model and hopefully turn things around, things remain highly uncertain for the company’s long-term future, despite what was a promising fourth quarter for the business.

Shares of Groupon jumped around 17.5% in response to the pretty good piece of news. Over the past year, like many other stocks on the Nasdaq, Groupon managed to stage a pretty strong comeback over the past 12 months after dipping a bit earlier in the year. Since then, shares are up around 430% from their record lows back in March.

However, the general consensus about Groupon isn’t that clear. Out of the six or so Wall Street analysts covering the stock, three of them have a bullish target, two are neutral, and one is outright bearish.

Other online companies that also reported their Q4 results recently, such as Etsy (NASDAQ: ETSY), have exceeded Wall Street expectations as well, with Etsy rising around 12.4%. While not the best performers on Friday, both companies were in the top movers of the day.

Groupon Company Profile

Groupon acts as the middleman between consumers and merchants, offering a variety of products and services at discounts via its online store. It offers consumers daily deals (in the form of online vouchers) from local merchants. Groupon also sells products directly to consumers. It generates revenue from the take rate on the purchase and/or usage of the vouchers (40% of total revenue) and from direct sales (60% of total revenue). More than 65% of Groupon’s revenue comes from North America. – Warrior Trading News

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