You’ve always wanted to jump out of a plane, but you’re waiting for Groupon Inc (NASDAQ:GRPN) to offer 50% sky diving before you take the plunge! But, once that email offer arrives you better hurry. With more and more users, these Groupon deals are going fast.
Groupon in the News
Earlier this week, Groupon Inc (NASDAQ:GRPN), a popular deal-of-the-day website, released first-quarter results, revealing revenue of $757.60 million and non-GAAP earnings per share of $0.01. However, analysts expected the company to earn $0.03 per share on revenue of $740 million, and the stock fell around 3%. But, despite the dip, the company actually reported that unit volume was up 85% year-over-year to 84 million for the quarter, and gross billings totaled $1.82 billion for the quarter, up 29% from this period last year. Groupon even raised its guidance and now expects adjusted EBITDA to exceed $300 million.
An Analyst Perspective
While some analysts are still exercising caution, Piper Jaffray analyst Gene Munster reiterated his BUY Groupon rating and raised his price target from $15.00 to $16.00. Gene argued, “while North American local billings disappointed, most metrics suggest a turnaround is on-track.” Gene believes that you have to look at the whole picture saying, “While North America local billings were a disappointment, focusing on that metric misses the bigger story that Groupon’s transaction of building a vibrant deal marketplace is largely on track. This belief is based on Mar-14 NA billings (includes goods and travel) growth up 15% y/y from 10% in Dec-13, and guidance for the back half of 2014, which suggests an acceleration in all key metrics.” He added that, “the number of deals in the quarter increased 43% q/q to a total of 200k, supporting the theme that Groupon is building out its marketplace.”
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Gene’s Recommendation History
Gene has a 67% success rate recommending Groupon Inc (NASDAQ:GRPN) in the past and has earned a +21.7% average return over S&P-500 on the stock. His success recommending Groupon, along with other Internet stocks, has helped him earn the 149 spot out of 3057 analysts, with a +1.8% average return over S&P-500 and an overall success rate of 54%.
Gene earned one of his highest returns recommending Groupon Inc (NASDAQ:GRPN) in May 2013. Gene recommended BUY Groupon and raised his price target from $7 to $9 after it appeared that the stock was finally settling following a year of unrest. Gene noted, “The March quarter was an encouraging sign that Groupon has a long-term business. We believe the deal space is real and Groupon’s leadership position will yield a growing, albeit slow business in 2014 and 2015.” North American sales climbed by 42.3%, reaching $339.6 million, and Gene ended up earning +65.9% over S&P-500.
In February of last year, Gene saw another nice return when he recommended BUY Groupon. After conducting his own research, Gene noted, “We believe the upcoming quarter and guidance will showcase improving international business trends following two quarters of sequential decreases, while we expect that [North American] trends will remain strong based upon our Groupon re-buy survey, which saw 64% of customers planning to buy another Groupon in the next six months.” Gene ended up earning +4.5% over S&P-500.
On April 24, Gene recommended another technology stock, Apple Inc. (NASDAQ:AAPL), reiterating his BUY rating and $640 price target. With reassurance from Q2 iPhone sales Gene noted, “The March quarter also had signs that were encouraging in terms of getting comfortable with owing AAPL for more than the product cycle, including 14% upside to iPhone (57% of revenue) and a 30% increase to the capital distribution plan. We see the iPhone number and the capital distribution plan as outweighing the negative of a 17% unit miss on the iPad (17% of revenue).” The fact that Apple guided revenue was in-line with the Street meant that, “the company is expecting the business to remain healthy in the final quarter before new products begin to roll out.” This recommendation has earned Gene +5.1% over S&P-500.
During this tough stretch for Internet stocks, Gene has experienced a few losses, including his April 17th recommendation to BUY Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL). Gene called Google’s Q1 a “small bump in an otherwise clear road.” Even though the company’s Q1 results were slightly disappointing, Gene argued, “we believe Google remains on track to continue its steady trend of growth for its core business as it invests in other products like YouTube, Android, robotics, Fiber, and more. We continue to view Google as the best long term large cap story in our coverage space given the company’s focus on innovation.” However, Google has been taking its time bouncing back and Gene has so far lost -4.0% over S&P-500.
Groupon Inc (NASDAQ:GRPN) has had a rough time, but Gene is ready to recommend BUY during a period that he views as stable. Are you ready for your next discount adventure?
Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]