Groupon (NASDAQ:GRPN) has made a remarkable turnaround this year and is up 56% year-to-date. This is largely after the company released its Q4 earnings, though the report still showed ongoing revenue declines and a substantial Q4 net loss.
Now that GRPN stock is above analyst consensus targets and facing significant operational challenges, it's time to examine whether this rally is genuine or a temporary bump.
The rally began when it beat Q4 revenue expectations and reported $130.4 million against analyst projections of $127.7 million. Management also provided optimistic 2025 guidance. It projects revenue between $493 million and $500 million and adjusted EBITDA of $70 million to $75 million.
However, looking beneath these headline figures reveals concerning fundamentals. Despite beating estimates, Q4 revenue actually declined 5.3% year-over-year. More worryingly, Groupon reported a substantial net loss of $50.6 million.
The core issue facing Groupon extends beyond quarterly fluctuations to its fundamental business model. The company built its success on offering deep discounts to attract customers, but this approach has proven unsustainable as it fails to generate long-term customer loyalty for merchants.
Many businesses have complained that Groupon deals were unprofitable and didn't create repeat customers. Active customers remained flat at 15.4 million quarter-over-quarter but declined 6% year-over-year. While local billings in North America grew 8% in Q4, international billings dropped by 11%. Analysts expect Groupon's revenue to decline 1.3% through the end of 2025.
My main problem is that you’re paying too much for GRPN stock. This stock trades at 38 times forward earnings and 1.5 times forward sales. In 2026, EPS is expected to fall by 55%, and revenue is only expected to grow by 6.7%. You’re better off putting your money into more mainstream picks for the long run, so I’d take profits on GRPN at these levels.
