Here’s Why Groupon’s Stock Hit A New All-Time Low

Here’s Why Groupon’s Stock Hit A New All-Time Low

  • Groupon's stock was down more than 40% Wednesday.
  • The company notably missed Q4 expectations.
  • Shares hit a new all-time low of $1.70.

Long-term Groupon investors were likely browsing the platform to find a good alcohol deal to drown their sorrows. The stock traded lower Tuesday afternoon by more than 25% after reporting fourth quarter results but by Wednesday afternoon shares were lower by more than 40% and hit new all-time lows of $1.70. 

Q4 Results

Groupon said it earned seven cents per share in the fourth quarter on revenue of $612.3 million. Both numbers were notably below expectations of 15 cents per share and $709.35 million. Gross profit of $310 million was down 15% from a year ago.

Groupon’s North America gross profit fell 16% to $207.3 million. The company attributed its weakness to fewer customers, lower traffic and increased competition in the Goods business. Investors gave the company zero credit for improving gross profit per customer and gross profit per active customer.

CEO On Damage Control

By management’s own admission, it’s 2019 performance was poor. In a corresponding letter to investors, Groupon CEO Rich Williams wrote he is “incredibly disappointed” by management’s failure to meet investor expectations. It is reasonable for shareholders to feel a sense of frustration but management has a strategy to turn itself around.

Top priorities moving forward is a “quick” exit from the Goods category and expand local experiences marketplace. Coupled with a better inventory, a more modern mobile experience, a revamped brand, and a smaller more agile workforce, the company expects to “remove limitations and distractions.”

Financial Goals And Targets

Groupon believes it is a “clear leader” in the vague $1 trillion “Local” category given $3.4 billion worth of billings. The market share of less than 1% implies the tremendous potential to expand but comes against rising competition.

Management believes it can return to growth and guided the following metrics for 2022:

  • Unit growth percentage in the high single-digits.
  • Gross Billings growth percentage in the high single-digits.
  • Revenue growth percentage in the mid-single-digits.
  • Adjusted EBITDA margin in the high teens.

“At scale we believe we can unlock the potential of our financial model and become the largest two-sided marketplace that connects merchants to loyal, engaged customers who are looking for unique local experiences around the world,” Groupon CFO Melissa Thomas said in the earnings release.

Stock Split

Groupon’s stock traded below $2 per share on Wednesday and the board of directors already approved a reverse stock split at a ratio between 1-for-10 and 1-for-12. The proposal is subject to shareholder approval and the exact amount will be finalized after the June annual meeting.

By Jayson Derrick
Jayson Derrick has been writing professionally about stocks since 2011. He is particularly interested in alternative investments, hedge funds, and activist investing. He is a big fan of NHL hockey and lives in Montreal, Canada with his wife and four year old daughter.

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