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The Groupon earnings report (Nasdaq: GRPN) delivered today (Monday) after the bell beat earnings per share expectations, but failed to meet expected sales, showing the company's weakness going forward.
Groupon posted net income of $28.4 million, or 4 cents a share, compared to a net loss of $107.4 million, or 35 cents a share, for the same period last year.
Revenue jumped 45% to $568.3 million, though the company said sales would have grown by 53% when adjusted for currency exchange rates.
Analysts were expecting Groupon to do just a tad better than the first quarter. Estimates were for profit of three cents a share, versus two for last quarter, and revenue around $575 million, compared to Groupon's first quarter guidance of revenue between $550 million and $590 million.
The Groupon earnings report miss highlights the biggest concern among investors: Will this company be profitable?
Right now there are huge concerns.
"Groupon is overexposed to the European consumer and has seen its international growth slowing; the company has yet to roll out in those markets many of the new products and technologies that have driven US reacceleration," Goldman Sachs analyst Heath Terry wrote in a recent note.
Groupon Earnings Report Disappointed Investors
Analysts were guarded ahead of Groupon earnings, citing the waning U.S. economy, the mounting troubles in the Eurozone area, and the currency fluctuations.
"We expect a relatively in-line quarter for Groupon, with some risk potential as a result of foreign exchange headwinds," Ralph Shackart, an analyst at William Blair & Company LLC, wrote in a research note. "We believe there was likely some foreign exchange rate impact as a result of the decline of the euro in the quarter."
Investors wanted clarity on the company's strategic plans for the future, in addition to how it reports its revenue. After better-than expected revenue in the first quarter, several analysts covering Groupon raised a red flag when they commented the company hadn't been open in how it reports its income.
Analysts also noted the Chicago-based daily deals site, perhaps the best known name in the fast-growing arena of daily deals companies, faces more heated competition than when it started operating.
The company has little in the way of proprietary technology and the industry has no barrier to entry. As such, the number of competitors betting they can offer the same kinds of deals has grown by leaps and bounds.
Plus there have been myriad complaints from both Groupon businesses and users. As droves of shoppers move swiftly to redeem those deeply discounted coupons, they often find the businesses overwhelmed with zealous consumers, and the service lackluster.
After its highly anticipated initial public offering in November 2011, Groupon peaked at $31.14 a share shortly thereafter. Since then the stock has languished, and sits some 70% below its debut price.
"I think the stock has been way too beat up," Jeffrey Houston, an analyst with Barrington Research, told NBC News. "It's fairly common that people are still trying to figure out how to value it."
Like Facebook Inc. (Nasdaq: FB), Groupon's introduction as a public company garnered much hype, so much so that in late 2010 Google Inc. (Nasdaq: GOOG) offered to buy the company outright for $6 billion. Groupon passed on the offer and is now valued at less than $5 billion.
Ahead of the report, interest in Groupon's shares and options jumped. There was heavy activity in both the August $8 put and call options, signaling traders were expecting a large move.
Groupon (Nasdaq: GRPN) closed up 1.48% at $7.55 a share. In afterhours trading shares slumped 14% after the earnings report release.
Related Articles and News:
- Money Morning:
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Groupon (Nasdaq: GRPN) Stock Soars – But Red Flags Are Flying
- Market Day at NBC News:
Analysts expect roughly flat quarter for Groupon as Eurozone crisis hurts demand
- CNN Money:
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- The Wall Street Journal:
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- Globe and Mail:
Groupon has much to prove and even more to lose