Is Groupon Sunk After Q4 Miss, Stock-Split Proposal?

Groupon Inc. (NASDAQ: GRPN) shares plunged early on Wednesday after the company announced its fourth-quarter earnings, along with a business update. Ultimately, investors did not view either of these as favorable.

In terms of quarterly results, the company said that it had $0.07 in earnings per share (EPS) and $612.3 million in revenue. That compares with consensus estimates of $0.12 in EPS and $705 million in revenue. The same period of last year reportedly had EPS of $0.10 on $799.93 million in revenue.

Looking ahead to the 2020 full year, the company listed these operational goals:

  • Launch a new mobile app and expand bookable offers.
  • Grow North America Local units year over year in the second half of 2020.
  • And relaunch the brand and deploy a full-funnel marketing strategy.

Groupon did not offer any numbers in this outlook. Analysts are calling for $0.23 in EPS and $2.3 billion in revenue for the 2020 full year.

In this report, the company noted that it planned to exit the Goods category so it can focus on the $1 trillion “local experiences” market. At the same time, Groupon also named Melissa Thomas its chief financial officer and said it plans to pursue a reverse stock split to raise its share price.

The board of directors has already approved the reverse split, and will submit it to the stockholders at the June 2020 annual meeting. The proposal will be for a reverse split of common stock at a ratio between 1-for-10 and 1-for-12. This is subject to stockholder approval.

Rich Williams, Groupon CEO, commented:

We did not deliver the financial performance we expected during the fourth quarter and we recognize we must move swiftly to put Groupon back on a growth trajectory. Groupon is a leader and trusted brand in the highly fragmented, $1 trillion local experiences market. We believe our plan to exit Goods will allow us to dedicate the focus and resources necessary to build a winning position as the purchase of experiences continues to migrate online. Throughout 2020 you’ll see a stronger Groupon emerge, with broader inventory, modernized products, a refreshed brand, new ways for merchants to partner with us to grow and a leaner organization. Success in these areas will be key to achieving our goal of reigniting billings growth.

Shares of Groupon traded early Wednesday at $1.95, a pullback of 36%. The prior 52-week range was $2.17 to $3.82, and the consensus price target was $3.25.

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