Groupon Is Headed For A Strong Finish To 2014

  • Mobile has been the key driver of holiday shopping season in 2014.
  • Groupon has increased mobile revenue and traffic from mobile sources over the last few quarters.
  • The broader encouraging trends in mobile commerce and Groupon’s user metrics indicate a strong finish for Groupon’s FY 2014.

If the five day Cyber Week is any indication, the clear winner this holiday shopping season is turning out to be mobile. The 5 day Cyber Week saw a 12.5% year on year rise in online sales, with over 25% growth in mobile sales.
Following our earlier post on Apple's win on Black Friday, we today look at Groupon's wins from the 5 day shoppping cyber week. The increasing mobile sales could be the ramp that Groupon (GRPN) just needed, considering its ever increasing focus on the mobile platform and its improving mobile conversion metrics.

Groupon Q4 2014 analyst estimates and company guidance

Here is Groupon’s Q4 2014 analyst expectations and management guidance.

Q4 2014 guidance Q4 2014 Estimates
Revenue 900 907.2
EPS 0.03 0.03


The midpoint of management guidance (range of $875 - $925 million) implies a 17% YoY growth in revenue and a 1 cent drop in the non-GAAP earnings as compared to Q4 2013. Analysts, on average, estimate the revenue growth to be higher at 18.1% with a cent drop in non-GAAP earnings. We estimate the company to beat analyst consensus estimates and report at the higher end of the guidance revenue range, driven by strong mobile commerce growth in Q4 2014.

Mobile drives holiday shopping season

The holiday shopping season is on and the stats for Cyber Week are out. The 5 day Cyber Week saw online sales grow by 12.5% on a YoY basis, driven largely by growth in mobile shopping. The table below highlights the mobile driven growth in online shopping during the shopping week.

Online sales growth (YoY) Mobile sales growth (YoY)
Thanksgiving 14.30% 25.40%
Black Friday 9.50% 25.40%
Cyber Monday 8.50% 27.60%

Source: IBM Analytics

Mobile traffic accounted for a major part of traffic through the first major shopping week of the holiday season, with over 40% of traffic coming from mobile sources on Cyber Monday and 50% for Thanksgiving and Black Friday. The mobile share of total online sales also saw huge growth on each of the three shopping days.

Using the Cyber Week sales data points as an indication, Mobile will be the driver of online sales this shopping season and we think this could present a huge opportunity for Groupon, the online deals marketplace.

Groupon: Increasing focus on mobile leading to greater mobile revenue

Groupon has increased mobile focus, which has led to increased sale on mobile as more and more people have installed the Groupon app. As of Q3 2014, Groupon had over 100 million total app downloads. Groupon has seen over 30 million app downloads over the first three quarters of 2014, leading to a 43% increase in total app downloads.

The increase in App downloads has also translated to greater revenue share from Groupon’s mobile sales, which is reflected in the chart below.

Groupon mobile sales
Source: Statista

On a comparative note, Amazon saw 68.7 million mobile shoppers in August 2014, accounting for 40% of total traffic to Amazon.  The mobile shoppers contributed $16.8 billion to Amazon’s revenue in 2014, making up 28% of Amazon’s total revenue in 2014.

In our Groupon Q3 earnings report, we had also highlighted the improving active user trends and higher mobile conversion trends, which led to a topline beat in the September ended quarter.

In conclusion, Groupon’s increasing mobile focus will benefit from the broad based growth in mobile shopping seen in holiday season 2014. Moreover, the inherent nature of flash deals encourages mobile shopping which has worked out in favor of Groupon, as seen by strong mobile metrics over the last few quarters. We expect Groupon’s topline to benefit from these trends, which could lead to a strong finish to 2014 for the flash deals provider. It will therefore be interesting to see Groupon’s mobile metrics and topline performance for Q4 2014.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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