When it comes to earnings reports, Groupon Inc (NASDAQ:GRPN) can be like playing Russian roulette. After all, during its report for late October, Groupon stock plunged a grueling 22%. Although, things were much different for the fourth quarter. So far in early trading, GRPN is up about 23%.
Kind of makes your head spin, right? Definitely. Yet Groupon stock is the kind of thing that gets day traders excited.
Let’s get a rundown on what happened during the fourth quarter: Revenues rose by 2% to $934.9 million and the adjusted earnings came to 7 cents a share. The Street, on the other hand, was looking for revenues of $910.7 million and a loss of 2 cents a share.
Some of the highlights for Groupon earnings include:
- Billings in North America increased by 11% on a year-over-year basis.
- The net customer ads in North America came to 2 million. In all, the base is at 31.1 million.
- The cost cutting efforts continue, with a $33.5 million decline in SG&A (sales, general and administrative costs) on a year-over-year basis.
- GRPN repurchased 12.4 million shares in the quarter.
- The Groupon app is ranked #25 in the U.S.
- And finally, Groupon paid nothing for LivingSocial! Note that the company raised more than a billion in venture capital during its tumultuous history.
Keep in mind that Groupon has been pursuing a major restructuring for the past couple years. And a big part of this has been with streamlining the organization. To this end, GRPN has reduced its global footprint from 47 countries to 26 (the ultimate goal is to get this down to only 15 countries by this year). There has also been major cuts in the headcount, which has fallen by more than 1,500 to 8,300 during the past year.
By doing this, Groupon should be in a much better position to focus on higher-margin opportunities as well as to find ways to improve the customer experience.
Yet there continue to be major challenges for the company. First of all, the perception is that Groupon is still a daily deals site. And yes, this category has since proven to be mostly a fad (and an annoyance because of the pesky daily emails). True, Groupon has been moving toward being a traditional e-commerce platform. But this transition will likely take time.
Meanwhile, the competitive environment remains intense. No doubt, there is the mighty Amazon.com, Inc. (NASDAQ:AMZN), which continues to grow at a hefty pace. The company also has big-time advantages like its Kindle, Prime service and cloud service. Then there are other online giants, like Facebook Inc (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), that are leveraging their massive platforms to capitalize on the e-commerce opportunity.
Something else: There is also competition from traditional brick-and-mortar operators. Just look at Wal-Mart Stores Inc (NYSE:WMT), which has been aggressively investing in digital technologies (which has included the acquisition of Jet.com).
Bottom Line on GRPN Stock
It is also important to note that there are likely some technical factors at work with Groupon stock. Consider that the number of shares shorted compared to the float is at a hefty 19%. In other words, there is probably plenty of short covering going on right now, which is driving up the price of Groupon stock.
What’s more, the bar was set fairly low for Q4. Let’s face it, the top line is still lackluster. Oh, and it looks like the top line got a boost from the acquisition of LivingSocial. However, this will be a one-time thing.
So again, when it comes to Groupon stock, there are certainly opportunities for profits. But for the most part, they are for traders — who have tough stomachs for volatility — not buy-and-hold investors.
Tom Taulli runs the InvestorPlace blog IPO Playbook and also has his own free iOS app to estimate your tax refund, which is at PathwayTax.com. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.