Groupon Inc (NASDAQ:GRPN) CEO out: After market close Thursday, Groupon announced that it has replaced Andrew Mason as CEO with Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis. Mr. Lefkofsky and Mr. Leonsis will serve as CEOs on an interim basis as the company searches for a new CEO.
Not a big surprise: After Wednesday’s poor Q4 earnings report and outlook, many had suspected that Mr. Mason was likely facing increased scrutiny. This followed repeated media reports back in November 2012 that CEO Andrew Mason was to be replaced (which turned out at that time to be inaccurate).
Peter Lynch was one of the best growth investors of all time. As the Magellan Fund manager at Fidelity Investments between 1977 and 1990, he averaged a 29.2% annual return. Q1 2021 hedge fund letters, conferences and more The fund manager's investment strategy was straightforward. He wanted to find growth companies and sit on them Read More
Outlook hazier for Groupon Inc (NASDAQ:GRPN) : A new CEO increases near term uncertainties for the company as recent results have been weak and it is undergoing a major business transformation and investments.
New CEO but same challenges: While a new CEO may bring better skill sets (particularly in technology or online commerce), many investors believe that the challenges Groupon faces (slowing daily deals business and competition) will only increase.
Outlook still weak: Management’s Q1 2013 guidance for revenue of $560 – 610 million and operating income of $(10) – 10 million was well below current consensus estimates.
Maintaining estimates: Many analysts are maintaining their 2013 estimates for revenue of $2.60 billion and for EPS of $0.20. The company stated that the CEO news has no effect on the company’s just provided guidance.
Stock may be weak near term: With slightly worse than expected Q4 results and weak Q1 guidance, some of the recent investor optimism for Groupon Inc (NASDAQ:GRPN) may fade near term. The company has acknowledged that it remains in investment mode and that it is focused on growth over near term profitability.
Furthermore more many believe uncertainties with Groupon Inc (NASDAQ:GRPN) remain due to staff turnover, competition, and increased investments. The slowing growth and weak margins could bolster continued skepticism as to Groupon’s valuation, growth prospects, and profit potential despite its lower valuation and multiples.
Increased investments: Groupon Inc (NASDAQ:GRPN) has recently made a series of acquisitions and product introductions including Breadcrumb (POS for restaurants), Savored (online provider of restaurant reservations), and Groupon Payments (payments service for small businesses). While these initiatives have the potential to grow Groupon’s business longer term, these incremental costs will likely temper near term earnings.
Additionally, other senior executives could also leave in the coming months according to Edward Woo, CFA, an analyst at Ascendiant Capital Markets. A quote from Edward below.
Staff turnover: In the past several quarters, several high level executives have left the company. The 75% share price decline from the IPO (in November 2011 at $20/share) may make it harder for Groupon to retain staff as employees’ stock option values have declined. Headcount at the end of Q4 was 11,394 compared with Q3’s 11,866, and we expect further cuts in 2013. With the eventual hire of a new CEO, we believe it is likely that there will be additional turnover in senior management.