Online deal-provider Groupon Inc. (GRPN) recently launched a new app named “Snap by Groupon” for Apple’s (AAPL) iOS and Google’s (GOOGL) Android-based devices. The new app will pay back cash to people once they purchase featured grocery and consumer-packaged goods items.
Snap’s cash-back offers will feature on a variety of everyday grocery items ranging from basic staples, such as bread and milk, to personal care and household products including diapers and cleaning supplies. Once a user accumulates $20 in cash back, he will be eligible to cash out the amount.
Moreover, as an introductory offer, all people who download the app and use it to submit any grocery receipt through Nov 11, 2014, can enter a sweepstakes to win a year of free groceries for an entire family, worth $13,000.
Toronto-based Snap was acquired by Groupon in Jun 2014. Snap will be first launched in the U.S. and Canada, followed by other nations wherein Groupon operates.
In addition to selecting items from the lists on the app, Snap will also enable users to have their own customized grocery lists. Friends and family members can be easily referred to the app by users through their respective Facebook accounts and email contact lists. The users, in turn, will earn $1 cash back for every new member who opens an account and redeems their first eligible offer on the app.
We believe that the launch of Snap will enable Groupon to attract larger number of users, which, in turn will drive top line growth going forward.
Meanwhile, the company recently announced several additions to its popular Deal Builder tool to extend the feature to new restaurants and provide all businesses with greater control over their promotions on Groupon.
With the addition of restaurants, Deal Builder is now available to all local businesses. The new version of the tool will include a question-and-answer section in order to personalize the entire experience as well as highlight the unique aspects of the businesses.
We believe Groupon is well positioned to gain from rising e-commerce spending on mobile devices, a profitable domestic market and an under-penetrated international market. We expect these opportunities to continue to drive top-line growth. Moreover, increased traction in the mobile business is another positive for the company.
However, Groupon’s lowered EBITDA guidance for fiscal 2014 reflects ongoing investments that will continue to hurt profitability. We note that in North America, the company continues to face significant competition, which may pose a major headwind in the near term.
Moreover, the Genome offering will bring Groupon into direct competition with in-store payment providers (both hardware and software) like VeriFone (PAY), Micros Systems and Salesforce.com , which will be a potential deterrent in the long run.
Currently, Groupon has a Zacks Rank #3 (Hold).
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