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Bull of the Day for 11/10: Groupon (GRPN) (Revised)


Actor and comedian Tiffany Haddish recently stopped by Jimmy Kimmel Live, and hilariously described a time when she bought a Groupon for a Cajun swamp tour for her and Will & Jada Pinkett Smith—seriously, watch the interview, it will be the funniest thing you’ll see all day—giving Groupon GRPN a ringing endorsement it probably didn’t even know it needed.

The company is known for just that: random deal-of-the-day recommendations. You can score deals on restaurants, fitness, travel, and even Cajun swamp tours at bargain prices. Groupon is focused on connecting people with small businesses in their community and building voucher-less customer experiences.

Groupon is headquartered in Chicago, but you can find deals in cities across the U.S. and Canada, as well as Europe, Australia and Japan.

Impressive Turnaround

Sitting at a Zacks Rank #1 (Strong Buy), Groupon has been on an impressive rebound lately. Despite posting mixed third-quarter results, the company’s gross profit and adjusted EBITDA guidance keep climbing.

Earnings per share of a penny came in line with the Zacks Consensus Estimate, marking the fourth consecutive quarter of positive EPS. Revenues, however, declined 8% year-over-year to $634.5 million.

Even though the hurricanes in late August and September negatively impacted North American gross profit, this metric managed to increase 3%, while international gross profit surged 11% year-over-year.

Looking ahead, Groupon raised both its gross profit and adjusted EBITDA guidance range.

It now expects gross profit in the range of $1.305 to $1.355 billion, up from the range of $1.30 billion to $1.35 billion, and adjusted EBITDA in the range of $225 million-$245 million, up from the range of $215 million-$240 million.

Strong Growth Outlook

Groupon is currently witnessing major growth on its bottom line.

Current quarter estimates anticipate earnings to increase over 24%, while the company’s bottom line is projected to rise almost 230% and 50% for the current year and next year, respectively.

And, more and more analysts are revising their earnings estimates upwards for Groupon. Right now, six have shifted their estimate higher in the last 30 days compared to two lower for the current year.

Looking at the long term, Groupon expects earnings to grow 10%.

Shares are Soaring

So far this year, GRPN stock has gained close to 70% compared to the S&P 500’s return of over 15%. Groupon has also performed better than its industry, Internet-Commerce, which is no underperformer by any means; it has returned about 60% year-to-date.

Groupon, Inc. Price, Consensus and EPS Surprise

Groupon, Inc. Price, Consensus and EPS Surprise | Groupon, Inc. Quote

Groupon, though, is an expensive stock if you consider its forward price-to-earnings. Right now, its P/E sits at 42.41 compared to the industry average of 37.4. But, its price-to-sales is a commendable 1.07.

Since CEO Rich Williams took over in late 2015, Groupon has been able to reposition itself as a company where its improvements have now become sustainable.

With consistent profitability, cash-rich status, and growing user base—it ended the third-quarter with 32.5 million active customers—Groupon proves to be an exciting opportunity for investors.

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