Groupon’s (NASDAQ:GRPN) stock has been weighed on of late by IBM’s lawsuit against the company for intellectual property infringement, which the parties recently agreed to settle for $57 million. On July 27, Groupon’s stock fell 7% when a jury initially ruled in favor of IBM, followed by another 7% decline on August 3 due to misses on revenue and EPS. While the company has seen some improvements in operational metrics, until the company sees improvements in revenue growth, investors may remain skeptical. Below we discuss the trends impacting the company’s results and what we expect when it reports its third quarter earnings on Wednesday, November 7.
We currently have a price estimate of $5 per share for Groupon, which is around 30% higher than the current market price. Our interactive dashboard on Groupon’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.
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What To Expect From Q3 Earnings
While Groupon’s Q2 headline numbers came in lighter than expected, some of the company’s operating metrics have shown improvements of late:
- Excluding the IBM patent litigation impact, Groupon’s adjusted EBITDA did manage to grow both sequentially (up 5.5%) and on a year on year basis (up 6.9%) last quarter.
- While Groupon saw a ~300K decline in global active customers, its TTM (trailing twelve months) gross profit per customer increased sequentially by 0.4%, and 2.8% on a year-on-year basis. It is notable that this growth came on the back of a growing international business.
- Groupon’s focus on customer analytics also seems to be reflecting in the improving marketing ROI, where the company claims to be earning back each dollar of marketing expense in gross profit.
Despite these positive trends, the issues of declining revenue continue to persist. In addition, the company plans to continue investing in its international operations. We will therefore be looking for any commentary around volume and pricing growth.
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