Can Groupon Get Its Growth Back?

On Wednesday, Groupon (NASDAQ: GRPN  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. 

Groupon became famous for its popular daily deals, which allowed shoppers to take advantage of huge savings from Groupon's retailer-customers. But lately, that niche has lost its popularity, forcing the company to retrench. Let's take an early look at what's been happening with Groupon over the past quarter and what we're likely to see in its report.

Stats on Groupon

Analyst EPS Estimate

$0.03

Change From Year-Ago EPS

50%

Revenue Estimate

$588.92 million

Change From Year-Ago Revenue

5.3%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Can Groupon's earnings make its stock a great deal?
Analysts remain nervous about Groupon's earnings, having reduced their estimates in the past few months. With first-quarter estimates off $0.02 per share and the full-year 2013 consensus down twice that amount, what's surprising is that the stock has managed to post a 4% gain since late January.

The biggest news for Groupon this quarter arguably came in its fourth-quarter report, which was followed closely by the firing of CEO Andrew Mason. Competition from Amazon.com-staked LivingSocial and countless other knockoff daily deal offerings forced Groupon to turn to reselling overstocked merchandise from manufacturers, a lower-margin business that doesn't play to its social-media strengths. Moreover, the company has had difficulty trying to turn to the Chinese market for potential expansion, as Chinese e-commerce giant Alibaba has asserted its dominance over its home market and reined in any realistic plans that Groupon might have had in the emerging-market nation.

A potentially more lucrative source of growth could come from Groupon's attempts to bolster its fairly new payment-processing business. Despite its huge potential, however, payment processing is an immensely cutthroat industry, with eBay's (NASDAQ: EBAY  ) PayPal having taken the lead with its well-established service, while up-and-coming start-ups like Square try to disrupt PayPal's model. Groupon will have to demonstrate a clear advantage over current and future players in payment processing in order to win a fair share of the lucrative business, and that's a tough order in the current competitive environment.

Groupon is also trying to make itself more mobile-friendly by adding search features to its mobile apps. If customers can make purchases more easily, then the improved apps could create at least some growth avenues for Groupon.

In Groupon's quarterly report, watch to see whether its efforts to reach out to its network of business customers can bear fruit in bringing new business to the company. Moreover, if projections for the coming quarters falls short of the growth that investors want to see, then the stock could finally post sharper declines.

Will Groupon recover the promise it had early in its history, or leave shareholders suffering huge losses? Get the answer in the Fool's premium research report, in which our analyst looks at whether Groupon is still worth buying and why. Simply click here now to get started.

Click here to add Groupon to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (3) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 08, 2013, at 5:17 AM, Unityboss wrote:

    Many qualified managers have left Groupon. There are plenty of very severe problems and obviously those people "who should know it" do not see a future for Groupon! Isn't Groupon just a sinking ship?

  • Report this Comment On May 08, 2013, at 10:36 AM, tchen389 wrote:

    Even so, GRPN has enough cash to sustain 18.5 quarters (4.6 years) of continuos losses of that magnitude. Moreover, it makes GRPN a high value take over target given that its current market cap is only $3.6 billion. Factoring in the $1.5 billion it has in cash (with no debt), paying $3.15 billion (based on a 50% buyout premium) for GRPN is quite an attractive investment. Remember Google had offered $6 billion for GRPN before the company went public. That a 90% premium ON TOP OF THE 50% buyout premium assumed above. Current market value of GRPN is $2.1 billion (after subtracting its $1.5 billion cash in hand). A company like GRPN is better off selling itself to a larger player like Google, Yahoo, or Amazon. Those companies already have ventures in the daily deals space and GRPN would bring a lot of synergies at a relatively low price. Once GRPN can prove itself to be cash flow positive for a couple quarters, companies will be bidding to gain from synergies. Long term, don't worry about the ebbs and flow. This could go from its current price of $5.39 down to $4 (but not much lower) to $8 (not much higher), but ultimately some sort of bid will take place for GRPN. It clear management does not have a clear idea of how/where to take this firm, but that doesn't mean there isn't plenty of value in GRPN for another (much larger) player.

  • Report this Comment On May 08, 2013, at 1:43 PM, NobodysFool2013 wrote:

    Groupon is dead in the water. They have a horrible reputation with merchants and have burned far too many bridges ever to be trusted again.

    It was a flash in the pan. Everyone knows Groupon attracts problematic cheapskate consumers, just like eBay, the kind you don't want walking in your door. Customer retention rate is zilch, customer loyalty is zilch. Merchant shells out money to give goods and/or services away to bottom feeders. In turn bottom feeders leave bad reviews on equally trashy sites like Yelp and TripAdvisor.

    When will people learn? If you lie with dogs, you're going to get fleas.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2413636, ~/Articles/ArticleHandler.aspx, 10/1/2014 4:52:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement