Groupon Inc.

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Why Investors Fled After Groupon Earnings Report (Nasdaq: GRPN)

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.

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Hot Stocks: Don't Let Groupon Inc. Play You For a Fool

Groupon Inc. will try to get you to jump on its initial public offering (IPO) by touting its extreme growth and its profit potential - but don't believe it.

Even though Chicago-based Groupon, an e-commerce player that offers daily discounts to subscribers via e-mail, has exploded since it entered the online coupon world in 2008, that growth is threatened by the company's competition and mounting losses.

"The market opportunity isn't as big as the industry players would like you to believe," Sucharita Mulpuru, an analyst with Forrester Research Inc. (Nasdaq: FORR) wrote in an open letter to investors considering Groupon. "This IPO game isn't about finding value, it's about finding a greater fool who actually believes the valuation is true. Trust me, you will be the fool."

Here's why buying into what Groupon's saying about its profitability is a foolish move.

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