Shares of Groupon (GRPN +2.59%) fell as much as 16.8% on Wednesday morning, hamstrung by a mixed second-quarter report with gloomy guidance for the next period.
Groupon lowers full-year guidance amid tech issues
Groupon reported second-quarter revenue of $124.6 million, surpassing analyst expectations of $121.7 million. The bottom-line loss of $0.02 per share came in below Wall Street's consensus target of a $0.02 net profit per share.
So it was a mixed bag, but more importantly, management's outlook for the ongoing third quarter didn't sit well with investors. The company projected third-quarter revenue between $114 million and $120 million, far below the consensus estimate of $131 million. Adding to the revenue woes, Groupon lowered its full-year adjusted EBITDA outlook to $65 million-$80 million from the previous range of $80 million-$100 million.
A cloud computing migration project ran into stability issues, resulting in painful outages across Groupon's websites and internal technology tools.
NASDAQ: GRPN
Key Data Points
Positive trends provide some hope
It wasn't all bad news, though. Groupon's stock is still up about 70% over the past 52 weeks, reflecting widespread investor optimism about the company's turnaround efforts. And there are signs of life in the coupon-based marketing service. North American revenues and customer counts are growing, giving Groupon five consecutive quarters of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and positive free cash flow in Q2. Moreover, trailing free cash flows turned positive after more than three years of cash-burning operations. The stock should benefit over time if Groupon can hang on to its newfound cash-based profitability.
Investors should keep an eye on how Groupon addresses its technology infrastructure issues. According to CEO Dusan Senkypl, the company is only 25% through its long-term transformation plan, aiming to build a more stable and agile marketing platform. While the near-term outlook may be challenging, successful execution of this plan could set the stage for long-term growth.
I'm not exactly smashing the "buy" button for Groupon stock after this report, but the lower buy-in price gives Groupon investors a better chance of coming out ahead in the long haul. Just keep in mind that turnaround efforts are difficult and not guaranteed to work.
