Groupon Inc (NASDAQ:GRPN) will host its Investor Day on Nov. 11 in Chicago, and RBC Capital Markets analysts believe that the company currently faces ten key questions. Analysts Mark S. Mahaney, Rohit Kulkarni, in a report dated Nov. 9, 2014, list those ten questions and say they expect some of them to get addressed at the Investor Day.
Questions for Groupon Inc’s Investor Day
The analysts have segregated the ten questions under four headings. The first category is “High-Level Questions.” Under this heading, the questions listed are: 1) How has Groupon progressed against its previously outlined operating initiatives and what should we expect going forward? 2) How does Groupon plan to execute on its long-term goal of growing both Gross Billings and Gross Profit at least 20% annually over the next five years? 3) What percentage of users search on Groupon’s site? How can Groupon grow the percentage of people that search? 4) What marketing channels have worked well for Groupon?
The next few questions are categorized under “Local Questions.” These are: 5) What is the long-term growth and take rate outlook for the Local segment? 6) Now that we have seen a sequential improvement in North America Local Gross Billings growth, how should we think about Local Gross Billings growth outside of North America?
One of the questions has been reserved as a “Goods Question,” which asks: 7) What is the long-term growth and take rate outlook for the Goods segment? How does Groupon plan to improve Goods Gross Margins from here?
And the last three questions have been put under the Other Questions category, asking: 8) How does Groupon view its positioning in the Travel segment, and what is the company’s growth strategy from here? 9) How are Groupon’s new initiatives (including Pages and Gnome) progressing, and how could they impact the business going forward? 10) How does Groupon intend to reduce the Rest of World segment losses / bring the segment to profitability?
Uncertainty over turnaround
In the third quarter, Groupon reflected positive execution toward three operating initiatives, say the analysts. Growth in Local Gross Billings for North America came in at 10%, while the target was to reach double-digit growth by the fourth quarter. In North America, the gross margin for Goods hit 10%, compared to the goal of 10% by the fourth quarter. The operating loss was more than halved for the rest of the world segment compared to the June quarter.
Commenting on the turnaround, the analysts note that it can be expensive and take a long time, adding that Groupon has twice slashed its EBITDA growth outlook for 2014. This uncertainty surrounding the success and timing of the turnaround, analysts say, “leaves us on the sidelines for now.”
RBC Capital Markets has maintained its Market Perform rating on Groupon with a price target of $7.