Groupon Inc (NASDAQ:GRPN) shares skyrocketed 24.71% to $7.48 on Friday after the company reported better-than-expected third-quarter results. The company posted revenue of $757 million with adjusted EBITDA of $67 million. Analysts on average were expecting $749 million in revenue and $60 in adjusted EBITDA. Third-quarter billings rose 39% YoY to $1.86 billion, beating the consensus estimate of $1.79 billion.
Groupon must perform well in Q4 as well
For the current quarter, the company guided revenue between $875 million and $925 million. It expects adjusted EBITDA of $80 million to $100 million. By comparison, Wall Street calls for $925 million in Q4 revenue and $113 million in adjusted EBITDA. Following strong results, Sterne Agee analysts Arvind Bhatia and Brett Strauser adjusted their FY2014 adjusted EBITDA estimate from $271 million to $257 million. The research firm said the reduction in EBITDA estimates reflects forex impact.
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Bhatia and Strauser said that Groupon management has delivered on all three of its fourth-quarter targets a quarter early. The company’s North America local billings grew 10%, gross margins for Goods segment reached 10%, and the Rest of the World segment had a positive EBITDA. However, analysts warned that some skeptics would argue that good performance in one quarter doesn’t make a trend.
So, the company must do equally well or better in the fourth quarter to assure investors of its growth trajectory. Groupon management continues to guide long-term billings and gross profit growth of 20% annually. Sterne Agee has a Buy rating on the stock with $12 price target. The research firm says Groupon has the potential for turnaround with improvement in execution.
LinkedIn expected to keep expanding its addressable market
Another tech firm, LinkedIn Corp, also reported its third-quarter results. The professional networking company’s Q3 revenue of $568 million handily beat the consensus estimate of $557.7 million. LinkedIn reported earnings of 52 cents a share, compared to the Wall Street expectations of 47 cents. The professional networking site added 18.6 million new users during the quarter, taking the total to 332 million.
LinkedIn guided fourth quarter revenue between $600 million and $605 million. It expects adjusted EBITDA of $153 million to $155 million. The company said at the earnings call that it has penetrated 55% of the total addressable market of about 600 million knowledge workers worldwide. However, Sterne Agee analysts believe the company to keep expanding its total addressable market by launching new products that appeal to the broader workforce.
Sterne Agee said LinkedIn is an attractive play for long-term investors. China represents a huge opportunity for the company. What’s more, the research firm expects the Sales Navigator product to start generating revenue from the current quarter