Please ensure Javascript is enabled for purposes of website accessibility

Why Groupon Stock Popped on Friday

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Groupon, Inc. Stock Quote
Groupon, Inc.
GRPN
$14.12 (-4.34%) $0.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.