Groupon Inc (NASDAQ:GRPN) sell side update following a Q1 slightly above expectations

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Groupon’s Q1 revenue came slightly above consensus, while, EPS remained in line

Groupon Inc. (NASDAQ:GRPN) held the Q1 FY16 earnings call yesterday following the close of market. The estimates came largely true as the results were mostly in line with consensus. GRPN is currently under quite a bind as it posted a break even for EPS owing to margins pressure.

Jefferies analyst, Brian Pitz believes that the fundamentals for the company have been improving as the company posted a quarter, somewhat, better than expectations. He further explained that the lack of profitability has been driven by heavy investments during the quarter; however, the company needs to continue to improvise in order to achieve sustainable growth over the next few quarters. Groupon has streamlined its international business and is currently operated in only 27 countries with North America being the major focus of the investments. The company also saw a raise in marketing expenditure in the said region in order to expand its consumer base.

Mr. Pitz shares his analysis of earnings report and sees a 2% y/y decline in revenue, which, amounted to $732 million, beating street estimate of $718 million. Adjusted EBITDA was $31 million which was also ahead of Street’s $23 million. The company failed to post positive EPS and reported net loss of 1 cent per share largely in line with Street’s 2 cents loss per share. Revenue from NA region increased 4% y/y and was reported at $501 million, 3 million below street’s $504 million estimate. International revenue was $231 million ahead of Street’s $221 million and decelerated at a pace of 15% y/y. NA billings appreciated by 5%, but, overall billings declined by 5%.

The analyst maintained his HOLD rating but raised price target to $3.50 from $3.00 on improving fundamentals. The company reiterated the guidance for FY16 with revenue expected to be within the range of $2.75 to $3.05 billion. The analyst opinion for GRPN is largely HOLD with 14 recommendations. Apart from hold, the company has 1 strong buy, 3 buy and 3 underperform. The stock is currently trading at $3.38, down 3.15% as of today at 12:48 PM EDT.

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