Groupon Inc (NASDAQ:GRPN) surprised the street with better than projected EBITDA and revenue. It added more than a million new clients in North America. As the firm continue to close unprofitable operating divisions and turns a more focused firm, the higher quality contracts will draw consumers into the platform. This approach could further support the sustained EBITDA and revenue growth.
The highlights
The strong EBITDA growth indicates that the CEO, Rich Williams, has made an impressive mark in Groupon since he became CEO in 2015. There is significant improvement in communication with investors and this has been enabling investors to become comfortable with the changes.
Going forward, there are numerous drivers that will be accretive to company’s growth estimate in the coming quarter. Groupon still has nearly $75 million to $125 million in incremental marketing spend for 2H2016. It will help the company to maintain the momentum in the local business segment. There is ongoing improvement on product quality, which will be critical to bring recurring customers on the platform, predominantly on the product side.
The expectations
Many analysts are bullish on Groupon stock post 2Q2016 financial report and continue to believe the firm to be a main beneficiary of the ongoing O2O drift in North America. The market study reveals that the group-buy business is a vital component of a large internet firm’s ecosystem. As the other big companies including Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL) slowly move into local advertising segment, Groupon can be good asset planned for takeout.
Groupon is keen on streamlining its operations to be competitive in the local advertising and services division. It plans to reduce the negative margin divisions in the goods segment and bring increased focus on value-add contracts that are more profitable for the mainstream. Although the company will face a hit from the Brexit, the long-term margin should be sustainable using the streamlined approach.
