Groupon Inc (GRPN) 4Q: The Positives And Negatives [REPORT]


Raymond James analyst Aaron Kessler writes about Groupon Inc (NASDAQ:GRPN)’s latest quarterly report, coming to the conclusion that overall, this is company that’s moving in the right direction.

Groupon Q4 details:

Groupon Inc (NASDAQ:GRPN) reported a mixed 4Q marked by improved EMEA performance though slower growth in North America Local and Rest of World (ROW). Additionally, management guided 1Q14 and 2014 EBITDA well below our/consensus previous estimates. While we believe Groupon Inc (NASDAQ:GRPN) is headed in the right direction (pull vs. push, focus on merchant quality, mobile investments), we reiterate our Market Perform rating as we believe these initiatives will take several quarters to play out and hence we expect shares to remain range-bound in the near-term.

* 4Q13 highlights: Gross billings of $1.59 billion increased 4.8% y/y (or 5.3% y/y currency neutral vs. 11% y/y in 3Q) and were generally in line with our estimate of $1.6 billion. Global units grew 11% y/y (vs. 9% y/y in 3Q) to 56 million, driven primarily by a 17% increase in North American units. Total gross profits of $378 million increased 6% y/y and 6% below our estimate, and CSOI of $47.9 million was below our $59 million estimate and compared to guidance of $40-60 million.

* Positives: 1) Global units increased 11% y/y (vs. 9% y/y last quarter); 2) EMEA local billings growth accelerated to 15% (vs. 13% in 3Q); 3) Mobile transactions increased to approximately 50% worldwide in December.

* Negatives: 1) North America local billings growth decelerated to1.5% y/y in 4Q (vs. +13.2% y/y in 3Q). Management indicated a difficult comparison from 4Q12 as well as continued impact from push to pull; 2) ROW revenue growth declined 15.2% y/y (-5.9% y/y forex neutral vs. +7% y/y forex neutral in 3Q) as Groupon reduced its investment in unprofitable cities; 3) 1Q EBITDA guidance of $20-40 million was well below our/consensus previous estimates of $102.5 million/$93 million while full year guidance of up slightly was significantly below our estimate/consensus of ~30% y/y.

* Estimates: Our 2014 revenue estimate increases by 16% (due to acquisitions) while our EBITDA estimate for 2014 decreases by 27%. We are also establishing 2015 revenue and EBITDA estimates of $3,827 million and $373 million.

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