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
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Why Investors Fled After Groupon Earnings Report (Nasdaq: GRPN)
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Is Groupon (Nasdaq: GRPN) the Next Enron?
Is Groupon the next Enron? ... No. It's worse.
Before the company even went public, there were signs that internal financial controls weren't up to snuff.
Now I'm hearing refrains of "three blind mice" as "defrauded" investors line up to have their day in court. You might as well say the "dog ate my homework."
It's not like no one knew this was coming.
The U.S. Securities and Exchange Commission (SEC) made management redo Groupon's financial statements and accounting practices not once, but twice before the company's January 2011 initial public offering (IPO).
The first time involved including the cost of marketing in operating income - duh. The second was to force the company to deduct merchant payments from revenues - double duh!
Both are basic accounting principles.
If you spent $2 to gain $1 in orders you have to report that as a $1 loss if you're dealing with cold, hard cash. Also, if you have $1 in merchant payments, you can't count that as $2 in revenues, unless apparently you work at Groupon and love accrual accounting.
It's not like Groupon execs can claim they didn't know.
It's abundantly clear to me that the "company" has very little, if any, understanding of REG FD and securities litigation.
(REG FD, in case you are not familiar with it, is short for Regulation Fair Disclosure which the SEC adopted Aug. 15, 2000. REG FD is intended to eliminate selective disclosure of material non-public information.)
But I have a hunch they're going to find out the hard way.
In an official statement, Ernst & Young, the company's primary auditor, noted "material weakness" with regard to the company's internal controls. Investors simply noted that they'd better get going while the going was good.
Groupon's share price tumbled 16.87% Monday alone and is down 55% from its peak.
Before the company even went public, there were signs that internal financial controls weren't up to snuff.
Now I'm hearing refrains of "three blind mice" as "defrauded" investors line up to have their day in court. You might as well say the "dog ate my homework."
It's not like no one knew this was coming.
The U.S. Securities and Exchange Commission (SEC) made management redo Groupon's financial statements and accounting practices not once, but twice before the company's January 2011 initial public offering (IPO).
The first time involved including the cost of marketing in operating income - duh. The second was to force the company to deduct merchant payments from revenues - double duh!
Both are basic accounting principles.
If you spent $2 to gain $1 in orders you have to report that as a $1 loss if you're dealing with cold, hard cash. Also, if you have $1 in merchant payments, you can't count that as $2 in revenues, unless apparently you work at Groupon and love accrual accounting.
It's not like Groupon execs can claim they didn't know.
It's abundantly clear to me that the "company" has very little, if any, understanding of REG FD and securities litigation.
(REG FD, in case you are not familiar with it, is short for Regulation Fair Disclosure which the SEC adopted Aug. 15, 2000. REG FD is intended to eliminate selective disclosure of material non-public information.)
But I have a hunch they're going to find out the hard way.
Groupon's "Material Weakness"
When the SEC came knocking again on April 2nd the company was forced to restate its Q4 financials. That summarily reduced Groupon's revenue by $14 million and profits - assuming there were any to begin with - by $22.6 million.In an official statement, Ernst & Young, the company's primary auditor, noted "material weakness" with regard to the company's internal controls. Investors simply noted that they'd better get going while the going was good.
Groupon's share price tumbled 16.87% Monday alone and is down 55% from its peak.
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Groupon Inc. (Nasdaq: GRPN) Earnings Report Sends Investors Bailing on the Stock
Today's (Wednesday's) Groupon Inc. (Nasdaq: GRPN) earnings report - the first since the company went public in November 2011 - failed to show investors why they should believe in the social media-related stock.
Groupon reported a net loss before adjustments of $42.7 million, or 8 cents a share, compared to a net loss of $378.6 million, or $1.08 a share, for the same period last year. Revenue rose 194% to $506.5 million.
Wall Street expected earnings per share of 3 cents on $475 million in sales. With profit missing expectations and disappointing investors, shares fell 12% in after-hours trading.
The lower-than-expected earnings fueled the bearish outlook on Groupon.
"True, Groupon has plenty of cash in the bank and no debt, but you can find much better tech companies out there with stronger cash flow and solid earnings," Money Morning Defense and Technology Specialist Michael Robinson said last month. "For 2012, GRPN is a tech stock to avoid."
Groupon stock, along with last year's other Internet IPOs LinkedIn Corp. (NYSE: LNKD), Pandora Media Inc. (NYSE: P), and Zynga Inc. (Nasdaq: ZNGA), got a pop from recent investor excitement over the Facebook IPO. Groupon was up 7% Feb. 2, the day after Facebook made its IPO filing. LinkedIn rose 6%, Pandora 3%, and Zynga 17%.
Regardless of a recent share price spikes, the Internet IPOs of last year still face the growth and profitability obstacles that turned investors off before.
Groupon reported a net loss before adjustments of $42.7 million, or 8 cents a share, compared to a net loss of $378.6 million, or $1.08 a share, for the same period last year. Revenue rose 194% to $506.5 million.
Wall Street expected earnings per share of 3 cents on $475 million in sales. With profit missing expectations and disappointing investors, shares fell 12% in after-hours trading.
The lower-than-expected earnings fueled the bearish outlook on Groupon.
"True, Groupon has plenty of cash in the bank and no debt, but you can find much better tech companies out there with stronger cash flow and solid earnings," Money Morning Defense and Technology Specialist Michael Robinson said last month. "For 2012, GRPN is a tech stock to avoid."
Avoid Groupon Inc. (Nasdaq: GRPN)
Groupon has slipped about 7% since its first trading day Nov. 11 to Wednesday's closing price of $24.58. Wall Street has a one-year price target of $25.06 - a mere 2% gain from Wednesday's close.Groupon stock, along with last year's other Internet IPOs LinkedIn Corp. (NYSE: LNKD), Pandora Media Inc. (NYSE: P), and Zynga Inc. (Nasdaq: ZNGA), got a pop from recent investor excitement over the Facebook IPO. Groupon was up 7% Feb. 2, the day after Facebook made its IPO filing. LinkedIn rose 6%, Pandora 3%, and Zynga 17%.
Regardless of a recent share price spikes, the Internet IPOs of last year still face the growth and profitability obstacles that turned investors off before.
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