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Groupon Inc GRPN

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Morningstar’s Analysis

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Groupon Narrows Operating Loss in Third Quarter; Maintaining Fair Value Estimate

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

Groupon reported mixed third-quarter results, with revenue coming in slightly below our projections and the FactSet consensus estimates. The firm’s successful cost-restructuring plan helped the bottom-line numbers beat expectations. The third quarter reflected the impact of the pandemic as goods sales declined in both the North American and international markets. However, the firm has committed to returning to growth with an aggressive expansion strategy in test markets, in addition to launching experimental products and deal offerings. Despite the pandemic-induced drop in consumer demand for deals, we are pleased with management’s efforts to improve purchase frequency and billings growth, and we expect the firm to recover after the coronavirus pandemic. We are maintaining our $48 fair value estimate, and the stock continues to trade at a significant discount.

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Company Profile

Business Description

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.

600 West Chicago Avenue, Suite 400
Chicago, IL, 60654
T +1 312 334-1579
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Distressed
Employees 6,345