Groupon (NASDAQ:GRPN) announced their Q4 earnings results today.

Revenue came in at $612.3M which missed the consensus estimate of $704.87M

EPS was $0.13 for the quarter which missed the consensus estimate of $0.15

The CEO of Groupon, Rich Williams, has admitted that the company underperformed for this quarter and tried to reassure shareholders that the company will be back on track for growth in the coming quarters.

The company provided the following targets that they would like to reach by 2022.

Unit growth % – High single-digits
Gross Billings growth % – High single-digits
Revenue growth % – Mid single-digits
Adjusted EBITDA margin – High teens

Groupon has been getting hit hard in the stock market for a long time now. The stock has declined over 17% since the same time last year and has been downtrending ever since it peaked back in 2012 at over $20 a share. Now it is often described by pundits as a “two-buck chuck” stock, as the price frequently fluctuates in the $2-3 range.

Much of Groupon’s troubles can be summed up as a general decline of its popularity throughout the years, and a failure by the management to adapt to changing consumer trends.

Believe It Or Not, Groupon Used To Be Cool

When Groupon took the internet by storm back in its heyday in 2012 when the company first IPO’d. The idea behind Groupon is to leverage the collective bargaining power of large groups of people to get businesses to offer better discounts, and do so by leveraging the internet using an eCommerce platform. The term “Groupon” is a combination of “group” and “coupon”. The idea was a hit at first, the company was valued at over $1B within the first 16 months of its operation, the first to do so in history at the time.

Part of Groupon’s decline can be blamed on business tactics that have caused controversy among many partnered businesses that Groupon has relationships to. It is reported that Groupon would often pressure small businesses like restaurants and spas to give steep discounts of 50% or more, and then take a 50% cut on the remaining revenue of the deal.

Such steep fees soured the relationship between Groupon and its business partners and Groupon started slowly falling out of favour.

Also, Groupon tended to attract customers that are more bargain oriented and these customers were on average less likely to buy other products or services from the business which would typically help the business make back some of the lost revenue from offering a deal.

Groupon Is Getting Beat At Their Own Game

It seems pretty clear that for the past 5 years, Groupon has failed to properly adapt to changing consumer trends and is being eclipsed in popularity by similar services like Rakuten, a Tokyo-based company that had just acquired Ebates.com, another famous coupon site, as well as Honey which is owned by Paypal, is a browser extension that automatically applies coupons when it sees that the user is shopping online.

These days, more and more transactions seem to be done completely online and consumers often shop individually as opposed to trying to get group deals. Honey has also been more active in advertising its services as it partners with many famous tech-related Youtube channels in order to appeal to millennial consumers more. Groupon on the other hand, seems old and outdated in the eyes of many younger consumers.

Groupon’s troubles only seem more apparent since as recently as 2017, it was rumored that Groupon was seeking a buyout. Obviously, if these rumors were true, Groupon failed to find a buyer for the price that they wanted and the stock has only continued to decline ever since.

Expectations for Groupon from Wall Street are low, the company currently trades at a forward P/E of 12.5 according to Yahoo! Finance. That is laughably low for any company that is remotely close to being considered a tech company. Clearly, Wall Street believes that Groupon will continue to become more and more irrelevant.

Until we see some sort of potential or growth catalyst, the stock remains dead money and the downward trend is unlikely to reverse in the long-term.

 

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