Groupon Stock Plummets 27% on Mixed Q3 Earnings

Groupon (GRPN) stock took a nosedive on Wednesday, plunging by 27% following the company's third-quarter earnings report. The market reacted negatively to mixed results, with earnings per share (EPS) beating estimates but revenue falling short. This article delves into the reasons behind the stock's dramatic decline and explores the broader context of Groupon's financial performance.

Groupon reported adjusted EPS of 12 cents for the quarter, surpassing analyst estimates by 1 cent. However, revenue of $126.47 million missed expectations by $0.22 million and marked a 12% year-over-year decline. This revenue miss, coupled with the company's ongoing struggles to grow its business, likely contributed to the significant stock price drop.

The company's interim CEO, Dusan Senkypl, acknowledged challenges in the earnings report, stating, "While we did not make as much progress on key projects as I expected and our business continues to be challenged, I am pleased to see sequential improvement in our financial performance, Local Billings returning to growth, and announce a plan to strengthen our liquidity position."

Groupon's equity plan to raise $100 million through a fully backstopped equity rights offering and non-core asset sales also played a role in the stock's decline. Investors may have been concerned about the dilution of existing shareholders, as issuing new shares can decrease the value of each share. Additionally, the need to raise funds through asset sales suggests financial strain, which could have further spooked investors.

Groupon's historical financial performance and stock price trends have contributed to investor concerns. The company's Snowflake Score of 3/6 for valuation and 2/6 for financial health indicates that investors are wary of its financial health. Debt is not well covered by operating cash flow, and shareholders have been diluted in the past year. Groupon's stock price has been volatile, with a beta of 1.77, and its 5-year change in stock price is -85.46%. The recent drop in Groupon's stock price can be attributed to investor concerns about the company's financial health and revenue growth, as well as its volatile stock price.



The current consensus among analysts regarding Groupon's stock price forecast is a 'Hold' rating, with a 12-month price target of $16.83, indicating a 103.75% upside. However, the stock's 3-month change of -39.80% suggests a disconnect between analyst optimism and market sentiment. Investors should consider the company's recent performance and the broader market context when evaluating Groupon's investment potential.

In conclusion, Groupon's stock plummeted by 27% on Wednesday due to mixed Q3 earnings, with EPS beating estimates but revenue missing expectations. The company's equity plan to raise $100 million and its historical financial performance contributed to investor concerns. As the market continues to digest Groupon's recent results, investors should remain vigilant and consider the company's long-term prospects before making investment decisions.