Barrington Is 'Cautiously Optimistic' Groupon Will Reaccelerate Growth, Profitability

In a report published Tuesday, Barrington Research analyst Jeff Houston commented that Groupon Inc's (NASDAQ: GRPN) reported fourth quarter results were above expectations and the company continues to progress on its evolution.

According to Houston, Groupon is "increasingly" fulfilling demand through a selection of deals on its marketplace, which was launched in 2012, rather than just generating demand.

The analyst noted that he remains "cautiously optimistic" that the company will re-accelerate growth and profitability by improving its international operations and moving away from email to non-email, increasing Goods' profitability, and increasing growth in domestic local.

Houston noted that while Groupon's first quarter guidance was below consensus expectations due to currency fluctuations and the company's Ticket Monster investments, management maintained its full-year guidance on a foreign exchange neutral basis.

In support of his outlook, Houston noted Groupon's growth in the fourth quarter. Global units rose 81 percent year over year to 101 million, active deals rose 23 percent sequentially to over 370,000 globally, active customers rose 23 percent year over year to 53.9 million, average customer spend rose $6 sequentially to $155.

At the same time, mobile transactions remained more than half of the company's total transactions while search drove 26 percent of transactions, up from 19 percent in the fourth quarter 2013.

Looking forward to the first quarter, Houston estimated Groupon will report revenue of $805.4 million (down from prior estimate of $863.7 million) and earn $0.01 per share.

Shares were reiterated with an Outperform rating and $9 price target.