This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Are Groupon Shares the Deal of the Day?

NEW YORK ( TheStreet) --Investors looking to buy Groupon (GRPN - Get Report) may need a "groupon" of their own following strong first-quarter earnings.

The company had been beset by low expectations, accounting issues and board members leaving. The Chicago-based firm, however, managed to surpass Wall Street's expectations, with growth re-accelerating.

Revenue soared 89% year-over-year, thanks in part to a strong international segment, which saw 102% growth in the same time frame. Citigroup analyst Mark Mahaney noted that, although there was a 103% rise in gross billings year-over-year, the company's revenue growth slowed from the prior quarter. Nonetheless, North American revenue growth rose 33% year-over-year, and Consolidated Segment Operating Income (CSOI) margin came in at 12%, a record high. Mahaney upgraded Groupon to "buy" and raised his price target to $24 from $22.

Groupon reported first-quarter earnings of 2 cents a share on $559.3 million in revenue. The average estimate of analysts polled by Thomson Reuters was for profit of a penny a share on revenue of $530.6 million. The daily deals site also forecast stronger-than-expected second-quarter revenue between $550 million and $590 million. Analysts expect $558.7 million in sales.

Led by CEO Andrew Mason, Groupon has expanded into new initiatives, such as mobile, personalization, and Groupon Getaways, a strategy that has brought in new customers and helped monetization. "Given that North America is a more mature market relative to many international markets, we believe GRPN's 1Q performance was particularly impressive," wrote Sterne Agee analyst Arvind Bhatia. "Active customers, groupons per customer, and revenue per groupon each increased in 1Q in North America." Bhatia upgraded Groupon to "buy" with a $20 price target.

Groupon competes with a slew of companies, including LivingSocial, Amazon (AMZN - Get Report) and a host of others in the North American market, but international is perhaps Groupon's most important segment, accounting for 57% of revenue during the quarter. Benchmark analyst Clayton Moran noted that international segments proved profitable for the first time, with an operating profit of more than $27 million. Moran has a "buy" rating on Groupon, but lowered his price target to $20 from $28.

Despite the sharp run up in share price on Monday and early Tuesday, Groupon is still down 33.2% year-to-date. Gross margins declined for the fourth straight quarter, and marketing spending for new customers continues to rise. Mahaney notes that overall marketing spend per net new active customer was $38 in the first-quarter, the highest rate since the fourth-quarter of 2010. Marketing spend was was down for the fourth straight quarter, however.

The jury still appears to be out on Groupon, even with solid first-quarter results, but more quarters like this, and investors may have to purchase one of the company's daily deals just to buy the stock.

Shares of Groupon are soaring in Tuesday trading, up 18.86% to $13.95.

Interested in more on Groupon? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMZN $673.26 0.00%
GRPN $2.90 0.00%
AAPL $117.81 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs