Groupon beats Q4 EPS view, issues positive FY17 outlook

E-commerce marketplace Groupon (NASDAQ: GRPN) reported a widened GAAP loss in the fiscal 2016 fourth-quarter, compared with the similar period of 2015.

However, excluding items, the company reported a higher non-GAAP profit, versus last year’s corresponding quarter, and better than analysts’ estimates. The company also reported a marginal y-o-y increase in revenue. This propelled the stock by about 22% to $4.74 in the past few trading sessions. We anticipate the uptrend to continue due to the following reasons.

The Chicago, Illinois-based company reported Q4-2016 revenue of $934.8 million, up from $917.17 million in Q4-2015.

Analysts had expected Groupon to report revenues of $912.8 million. For the fourth-quarter, the deal of the day offer provider recorded a widened net loss of $50.20 million or $0.09 per share, from a net loss of $32.55 million or $0.06 per share in the similar quarter of 2015.

CNBC

Excluding the impact of stock based compensation, amortization charges, and acquisition expenses, among others, the Q4 non-GAAP earnings increased to $0.07 per share, from $0.04 per share last year, and above analysts’ estimates of $0.02 per share.

The company stated that it added about 5 million customers worldwide in 2016. This includes 2 million members from North America. At the end of the fourth-quarter, the company had 31.2 million customers in North America and 52.7 million worldwide. About 1 million of its customers were from LivingSocial, which was acquired in October 2016.

In order to streamline its operations and become more efficient, Groupon anticipates closing operations in 11 countries in the current quarter.

For fiscal 2017, the company anticipates gross profit of between $1.30 billion and $1.35 billion for the 15 markets it plans to continue operations from 2Q17 onwards. The profit outlook range is $40 million to $90 million higher compared with the fiscal 2016 gross profit from those 15 countries. At its peak, Groupon had operations in 50 countries.

Thus, considering the non-GAAP earnings, and positive outlook for fiscal 2017, we anticipate short-term bullishness in the stock to prevail.

The stock was range bound between 3.50 and 4.0 for the past four months. The optimistic Q4 results enabled the stock to break above the resistance level of 4, with a positive gap. The next major resistance for the stock exists at 5.40. The rising stochastic oscillator confirms the bullishness in the stock.

To trade the projected uptrend, a binary trader can invest in a call option contract, which is valid for a week. It is advisable to enter the trade when the stock trades below 4.80. This will increase the probability of ending the trade in the money.

---