Groupon (GRPN) has seen its stock decline by 25.2% year-to-date, lagging behind the broader market and its own industry. The company, known for its daily deals platform, is battling headwinds from its international market, unexpected cloud migration issues, and a business model heavily reliant on consumer discretionary spending. This dependence makes Groupon vulnerable to economic uncertainties, inflation, and shifts in consumer spending habits.
While these factors pose near-term challenges, Groupon’s long-term prospects remain promising. The company is steadily growing its North American Local segment, which contributes the most to its revenue. Its efforts to build long-term relationships with local merchants, curate its inventory, and improve customer experience are paying off. Groupon is lifting restrictions on deeply discounted deals, allowing customers to purchase them more than once, driving frequency and billings.
The company’s latest initiative, Flash Sale, has also shown strong traction. Initially launched with one enterprise merchant in the first quarter of 2024, the program was expanded in the second quarter, running over a dozen flash sales to boost engagement and drive performance. This initiative exemplifies Groupon’s ability to develop new products and expand its business.
Moreover, Groupon is leveraging Artificial Intelligence (AI) to improve its deal creation process, deal recommendations, and quality assurance. The company is also seeing growth in its enterprise accounts due to improvements in its sales organization and process changes.
The upward trend in earnings estimates further supports the bullish sentiment surrounding Groupon. The Zacks Consensus Estimate for earnings in 2024 has been revised upward by 56.7% over the past 60 days, signaling investor confidence in the company’s future.
Groupon’s valuation is also compelling. The company trades at a discount compared to its industry peers, with a forward 12-month Price/Sales ratio of 0.7X, making it an attractive opportunity for value investors.
Despite the near-term hurdles, Groupon’s strong marketplace platform, robust e-commerce business model, growing merchant base, and attractive valuation make it a compelling investment opportunity for growth-seeking investors. The company’s recent initiatives, innovative strategies, and positive earnings outlook suggest that Groupon could be well-positioned to capitalize on its market presence and deliver long-term value for its shareholders.
