Investors might think they've found a bargain today (Wednesday) in Groupon Inc. (Nasdaq: GRPN) stock, but it's best to think twice before making a move.
Indeed, Groupon stock swooned as much as 16.12%, or $1.17, to $5.90 after-hours Tuesday following a wider than expected Q2 loss and a trimming of its full year forecast. GRPN stock was down another 16% in premarket trading Wednesday.
The Chicago, Ill.-based company posted a loss of $0.03 per share, or $22.9 million, in the second quarter. That was steeper than the penny a share, or $7.6 million loss, reported in the same quarter a year ago. It also missed analyst expectations for earnings per share (EPS) of $0.01 on revenue of $761.8 million.
The dismal report marked the third consecutive earnings quarter in which Groupon lowered quarterly or annual guidance.
"Although the company has the opportunity to reduce marketing spend over the remainder of the year to achieve a higher target, given recent returns on those investments, it believes it is important to maintain flexibility for investment in long-term growth," the company said in a statement.
For the current quarter, Groupon projects EPS to break even or go up to $0.02 on revenue of $720 million to $770 million. That's short of consensus estimates for EPS of $0.03 on revenue of $760 million.
Following are key highlights of Groupon's Tuesday conference call that followed the Q2 release.
Groupon's (GRPN) Q2 Earnings Review
- Chief Executive Officer Eric Lefkofsky began the conference call stating, "We made good progress in the second quarter." He hyped strides made in gross billings and app downloads.
- Groupon has amassed 92 million downloads of its mobile app.
- Amid strong demand in North America, billings rose 12% in the region. Billings, however, were flat in Europe, the Middle East, and Africa.
- The company spent $88 million in Q2 on marketing investments.
- The average number of unused Groupons (advertised deals) in the United States has stabilized.
- Lefkofsky said Groupon is on track to reach goals of double-digit gross margins in the United States by the end of the 2014.
- The company has secured $250 million in revolving credit to give it more "balance sheet flexibility" in the future.
- Two new products were introduced on the call. They are Pages, which features information for local merchants, and Genome, a new operating systems for merchants. Genome aims to make payment processing easier and to allow consumers to make purchases without having to open their wallets. Lefkofsky touted these new products commenting "We believe we have an opportunity to connect the last mile of local commerce" in ways never done before.
- When asked what Groupon needs to do to improve its mobile product, Lefkofsky said Groupon is "a business very much in transformation."
- User experience was described as "still not beautiful," but the site's "freebies" business is going well.
- Asked if the company would consider "alternatives" (a sale or merger) if Groupon's business doesn't show meaningful appreciation, Lefkofsky replied our "heads are down" working on Groupon. Still, the CEO added that if the right offer presented itself, he would consider it. Lefkofsky was quick to note he says this mostly because Groupon is a publicly traded company, and as such, he is obligated to consider an attractive offer should one arise.
Groupon (GRPN) Stock Then and Now
Groupon went public in a much celebrated initial public offering on Nov. 4, 2011.
The global leader in daily deals raised $700 million after boosting the size of its IPO by 5 million shares to 35 million. Shares were priced at $20, above the expected range of $16 to $18. That valued Groupon at close to $13 billion, making it the largest IPO by a U.S. Internet company since Google Inc. (Nasdaq: GOOG; GOOGL) raised $1.7 billion in 2004.
GRPN stock hit a high of $31.14 in its first session as a publicly traded company and finished the day at $26.14.
One year later, Groupon shares were 79% below its $20 IPO price at $4.47.
Groupon fired its original CEO Andrew Mason a little more than a year after repeatedly missing earnings estimates and watching its shares sink. Under Lefkofsky the company has worked to stabilize its international business, bulk up its ecommerce offerings, and revamp its website and apps to be more of a destination to discover products, rather than a site that simply relies on daily deal emails for traffic.
Groupon stock recovered some with Lefkofsky at the helm as investors began to believe Groupon does have a viable and growing business.
Monday, the stock closed at $7.02. Tuesday, amid the after-hours plunge, GRPN shares were approaching its 52-week low of $5.18.
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