Groupon Rises After-Hours Despite Revenue Plunging 35% Y/Y

Shares in daily-deal site Groupon (GRPN) rose 4% after-hours on Tuesday after the company reported earning results that surpassed the Street’s very low expectations.

Specifically, first quarter non-GAAP EPS of -$1.63 beat Street estimates by $0.28 while revenue of $374.15M beats by $22.45M. Nonetheless revenue still plunged 35.3% year-over-year, while GAAP EPS of -$7.53 fell short of Street expectations by $4.11.

Total Gross Billings of $526.66M also represented a significant year-over-year drop of 31.5%, while gross profit was $201.2 million in the first quarter 2020, down 34%.

“COVID-19 has had a major impact on our business and we have moved quickly to position Groupon to weather the pandemic and to help our merchants face these unprecedented challenges,” said Aaron Cooper, Interim CEO of Groupon.

In terms of geographical breakdown, North America gross profit in the first quarter decreased 31% to $143.8 million, primarily due to the negative impact of COVID-19 on demand and refund levels in March and lower goods performance. International gross profit took a more severe hit, decreasing 40% to $57.5 million.

North America active customers were 25.3 million as of March 31, 2020 with 16.5 million international active customers.

However marketing expense declined by 36% to $60.1 million in Q1 2020 due to accelerated traffic declines, significantly shortened payback thresholds, and lower investment in offline marketing and brand.

As a result, GRPN ended the first quarter with $667 million in cash, which included $150 million of outstanding borrowings under a revolving credit facility.

Despite a 12% rally on Tuesday, Groupon is nonetheless trading down 43% year-to-date. Analysts have a cautious Hold consensus on the stock, with 3 recent hold ratings and 1 sell rating. Meanwhile the average analyst price target of $23.40 indicates further downside potential of 14% from current levels. (See GRPN stock analysis on TipRanks).

“We note that the poor execution and results over the past several years will increase investor’s skepticism on near and long term profitability and growth and valuation of the company” stated Ascendiant Capital analyst Edward Woo.

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