Groupon Stock Endures Major Drop, Sales Slow
Groupon is doing more business than ever in mobile, but slowing revenue growth overall in the third quarter pushed the company’s stock well below $3 a share Friday.
Groupon’s stock has fallen a whopping 86% from its IPO price of $20 a year ago on increasing investor concern about its core business model, widespread competition and daily deal fatigue among consumers.
In missing both analyst estimates and its own revenue guidance in the third quarter, the company pointed to a sharp slowdown in international sales, where growth fell to 3.1% from 31% in the second quarter. "Our solid performance in North America was offset by continued challenges in Europe," noted Groupon CEO Andrew Mason, in the earnings release today.
Groupon reported revenue of $568.6 million in the last quarter -- up 32% from a year ago, but short of its own projected range of $580 million to $620 million. It posted a net loss of nearly $3 million compared to a net loss of $54.3 million a year ago.
To help bolster sales and diversify its main deals business, Groupon has increasingly turned to mobile initiatives. In October, about one-third of transactions in North America were completed on mobile devices, an increase of 30% from a year ago. Earlier this year, Mason said Group mobile users spend about twice as much as its desktop shoppers.
During the third quarter, the company also rolled out its own mobile payments platform to compete with Square, PayPal Here and GoPago. Groupon Payments allows participating merchants to accept credit card payments using a small attachment that connects to an iOS device audio port. It charges a fee of 1.8% plus 15 cents per swiped transaction compared to PayPal’s 2.7% and Square’s 2.75% (or $275 flat monthly rate).
“We expect the company to increasingly integrate its payments, scheduling and rewards tools for merchants in order to drive higher merchant retention for its daily deals business while also closing the loop with users,” wrote JPMorgan analyst Doug Anmuth in a recent research note.
In the quarter, Groupon also introduced Breadcrumb, an iPad-based point of sale system for bars, restaurants and cafes in the U.S. The service, which includes an iPad, mobile app, printer, router and wireless service, works with the company’s new payments system.
From a user standpoint, Groupon’s iOS and Android apps have earned high marks. In the App Store, the its app has a rating of four out of five stars (all versions), while in the Google Playstore, it has four and a half out of five stars. The company rolled out new versions of both apps in late August aimed at making it easier to find current deals and see larger images of offers.