Groupon GRPN shares have dipped 25.7% year to date (YTD), underperforming the broader Zacks Retail-Wholesale sector’s appreciation of 28.8%.

It has also underperformed the Zacks Internet - Commerce industry and its peers like Booking Holdings BKNG, Amazon AMZN and Travelzoo TZOO. 

In the same time frame, shares of TZOO, BKNG and AMZN have returned 105.4%, 47.3%, and 38.6%, respectively. The industry has risen 33.5% YTD.

The company’s underperformance can be attributed to the decline in North America revenues due to an increase in local voucher redemption rates and in International revenues due to the exit of local business in Italy. In the third quarter of 2024, North America revenues of $86.9 million declined 9% year over year, whereas International revenues of $27.6 million decreased 13% year over year.

Groupon, Inc. Price and Consensus

Groupon, Inc. price-consensus-chart | Groupon, Inc. Quote

However, the strong performance of Consolidated Travel revenues bodes well for investors. Consolidated Travel revenues of $4.3 million increased 3.4% year over year.

GRPN’s Product Enhancement Drives Prospects

Groupon’s move from a deal company to a marketplace company has enabled it to add features to its platform to enhance its marketplace playbook and improve local experiences marketplace in various countries.

Groupon has not only invested in new feature development but also aims to leverage its front end to expand experiences and product features to drive customer momentum.

GRPN’s efforts to increase customer value are a tailwind. Improved personalization, AI-driven FAQ, custom merchant pages and relevant searches have increased customer interaction and retention and have also optimized targeting to drive customer momentum. 

Groupon has launched the front end with multiple language capabilities to expand market reach and engagement. The expanded flexibility not only allows users with flexibility, it also enables GRPN to increase its global reach. Video content on merchant pages has driven customer traffic and interaction with category pages, allowing GRPN to target customers and provide the right product offering.

GRPN’s new and developing Platform for Performance front-end platform will enable a faster and more stable customer experience. 

Groupon’s expanding partnerships with brands to drive incremental performance bodes well for investors.

GRPN’s Near-Term Prospect Dull

For the fourth quarter of 2024, the company expects revenues in the band of $124-$131 million, indicating a 10-5% year-over-year decline.

Adjusted EBITDA is expected to be between $14 million and $19 million.

Groupon expects a positive free cash flow for the fourth quarter.

The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 6 cents per share, down 10 cents in the past 30 days and indicating a year-over-year decline of 80%.

The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $129.17 million, indicating year-over-year decline of 6.21%.

GRPN’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, missing in one quarter, the average surprise being 159.52%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

For 2024, the company expects revenues between $486 million and $493 million, indicating a year-over-year change in the band of (6%)-(4%).

Adjusted EBITDA is expected to be between $65 million and $70 million.

Groupon expects a positive free cash flow for 2024.

The consensus mark for 2024 loss is pegged at 29 cents per share against the loss of 52 cents per share in the year-ago quarter. 

The Zacks Consensus Estimate for 2024 revenues is pegged at $491.35 million, indicating year-over-year decline of 4.58%.

GRPN’s Stretched Valuation Concern for Investors

GRPN shares are trading at a premium, as suggested by a Value Score of C.

In terms of the forward 12-month Price/Earnings (P/E) ratio, GRPN is trading at 58.8X, higher than the Zacks Retail-Wholesale sector’s 25.06X.

However, Groupon’s expanding product offering and market reach bodes well for investors.

GRPN currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a better time to enter GRPN shares. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Amazon.com, Inc. (AMZN) : Free Stock Analysis Report

Groupon, Inc. (GRPN) : Free Stock Analysis Report

Travelzoo (TZOO) : Free Stock Analysis Report

Booking Holdings Inc. (BKNG) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research