Groupon, Inc. (GRPN - Get Rating) is a marketplace operator that connects merchants to consumers. The company operates through two broad segments: North America and International. It offers services on behalf of third-party merchants and serves customers through its website and mobile applications.

The company’s new leadership arrived in December last year, which seemingly made investors concerned about the company’s prospects. The management change occurred two years into GRPN’s turnaround plan, which meant a start of a new program.

As the company jumped from one restructuring plan to another, the CEO outlined turnaround solutions such as cost-cutting, creating more differentiated inventory, and creating a new beauty and wellness marketplace.

Over the past year, the stock has declined 70.4% and 42.8% year-to-date to close its last trading session at $13.26. It has declined 14.9% over the past month.

Here are the factors that could affect GRPN’s performance in the near term:

Bleak Financials

For the fiscal first quarter ended March 31, GRPN’s total revenue decreased 41.9% year-over-year to $153.32 million. Net income attributable to GRPN declined 339.4% from the prior-year quarter to a negative $34.85 million. Net income per share came in at a negative $1.17, down 343.8% from the same period the prior year.

Bleak Growth Story

GRPN’s revenue has declined at a CAGR of 30.8% over the past three years and a 22.1% CAGR over the past five years. Its EBITDA has decreased at a CAGR of 47.2% over the past three years, while its total assets have declined at a 10.8% CAGR over the same period.

Analysts Expect Downsides

The consensus EPS estimates of a negative $0.43 and a negative $0.17 for the quarter ending June 2022 and the fiscal year 2022 indicate a 230.3% and 115% year-over-year decrease.

Likewise, the consensus revenue estimate for the same periods of $158.06 million and $688.86 million reflects declines of 40.6% and 28.8% from their respective prior-year periods.

POWR Ratings Reflect Bleak Prospects

GRPN’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

GRPN has a Sentiment grade of F in sync with the bleak analyst top and bottom-line growth expectations. The stock also has an F grade for Stability, consistent with its five-year monthly beta of 2.13.

GRPN has a Momentum grade of D. This is justified as the stock is trading lower than

In the 65-stock Internet industry, it is ranked #47. The industry is rated F.

Click here to see the additional POWR Ratings for GRPN (Growth, Value, and Quality).

View all the top stocks in the Internet industry here.

Bottom Line

The prospects of the company’s turnaround strategy look uncertain. Also, GRPN’s negative bottom line is concerning. The stock is currently trading below its 50-day and 200-day moving averages of $15.94 and $20.92. And with analysts expecting further decline in its revenue and EPS, I think the stock might be best avoided now.

How Does Groupon, Inc. (GRPN) Stack Up Against its Peers?

While GRPN has an overall POWR Rating of D, one might consider looking at its industry peers, Yelp Inc. (YELP - Get Rating), which has an overall A (Strong Buy) rating, and trivago N.V. (TRVG - Get Rating) and Travelzoo (TZOO - Get Rating), which have an overall B (Buy) rating.

GRPN shares were trading at $11.84 per share on Wednesday afternoon, down $1.42 (-10.71%). Year-to-date, GRPN has declined -48.88%, versus a -19.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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