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Why Groupon Stock Popped on Friday

By Evan Niu, CFA - Feb 26, 2021 at 3:37PM

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The e-commerce company reported fourth-quarter results and continued to make progress on transitioning to a new business model.

What happened

Shares of Groupon (GRPN -4.34%) have popped today, up by 15% as of 3 p.m. EST, after the company reported fourth-quarter earnings. The results topped expectations, and Groupon continued to make steady progress in its business model transition.

So what

Revenue in the fourth quarter was $343.1 million, comfortably above the consensus estimate of $304.1 million in sales. That resulted in net income of $15.1 million, or $0.51 per share, also topping the Street's forecast of $0.27 per share in profits. The e-commerce technology company has been in the process of shifting to a third-party (3P) model, which will have implications on how it recognizes revenue.

Green stock chart going up

Image source: Getty Images.

"Despite the challenges of 2020, we successfully implemented our restructuring plan and established a path for growth, and as a result, we are well positioned heading into 2021," interim CEO Aaron Cooper said in a statement. "Our fourth quarter results tell the story of our opportunity and included sequential consolidated revenue and gross profit growth, as well as sequential consolidated Local revenue growth."

Now what

Groupon has now completed its transition to its 3P model in North America and plans to similarly convert its international operations to the new model in the second quarter. That process is expected to be "largely compete" by the end of the third quarter. The underlying accounting change is that Groupon will start recognizing revenue on a net basis instead of a gross basis.

CFO Melissa Thomas commented, "I'm energized by the resilience we demonstrated in 2020, and as we execute on our growth strategy in 2021, we believe we are positioning Groupon to take share in the trillion dollar Local market."

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