Looking back, there's little surprise last year was a miserable one for daily deals platform Groupon (NASDAQ:GRPN). The world closed its doors for the better part of 2020 in response to the coronavirus pandemic, largely keeping consumers at home. Revenue fell 36% year over year from $2.22 billion to $1.42 billion, pushing the company back to an operating loss.

The good news? People are tired of being cooped up. In a survey from the company, Groupon found that 75% of Americans are "so #@$%ing ready" to begin doing simple things again like visiting a restaurant or watching a movie.

But analysts don't believe this readiness will prompt a revenue rebound in 2021. In fact, they're modeling another 32% slide for the company's top line. But with COVID-19 vaccines at least keeping the pandemic in check, these same analysts are calling for slight sales progress in 2022, paired with an enormous rebound on the bottom line.

Unfortunately, the problems undermining Groupon for years before the pandemic took hold will still be problems after the pandemic is nothing more than a memory.

A signpost pointing to "buy," hold," and "sell."

Image source: Getty Images.

Shrinking for a reason

Cutting straight to the chase, the world doesn't really need Groupon.

There's a handful of exceptions to the idea, of course. Some localized businesses would rather punt promotional duties to a company like Groupon rather than figure out more direct ways of connecting with consumers online. And activities like spa visits and concerts still somewhat lend themselves to the daily deals model. By and large, though, businesses and consumers alike are bypassing Groupon and its peers rather than relying on them as a digital intermediary.

The company's fiscal history bears this truth out. Sales peaked at just over $3 billion 2014, only a couple of years following the company's much-hyped IPO. Income didn't peak until 2018 but faltered in a big way in 2019. Sure, the coronavirus pandemic certainly hurt the company's bottom line, but given the underlying trends in place at the beginning of last year, 2020 may have been a disappointing one anyway.

Groupon's top line has been waning since 2014, though a profit rebound is projected between 2021 and 2023.

Data source: Thomson Reuters. Chart by author. All numbers are in millions of dollars.

Also note that Groupon has named three different CEOs since founder Andrew Mason stepped down in 2013. He was succeeded by Eric Lefkofsky, who was replaced by Rich Williams in 2015. Williams was demoted in March of last year and replaced by still-interim CEO Aaron Cooper. All of them talked about potential and a turnaround (though interim chief Cooper's rhetoric has been muted, particularly by the pandemic). None of them have delivered as hoped.

It's a subtle hint that leadership may not be the problem. Perhaps a flawed business model itself is the culprit.

Be wary of the bullish outlook

Investors as a whole don't seem concerned about any prospective flaws in the way Groupon works, bidding up the stock more than 400% from last March's low in anticipation of a recovery. While top-line growth is expected to be anemic for the next few years, these buyers appear to be latching onto an incredible profit projection. The current consensus earnings estimate of $3.35 per share for 2023 almost revisits 2018's record bottom line, completely reversing last year's plunge.

Take that outlook with a huge grain of salt, though. The outlook calls for near-record profits on what's also expected to be close to the weakest revenue since Groupon became a publicly-traded entity.

What's missing from this bold outlook is a clear explanation -- from analysts or the company itself -- of how Groupon will be able to achieve this goal. The expected profit growth is rooted in an enormous reduction in the company's costs of goods sold and administrative expenses, and sizable reductions in marketing spending. But cutting those costs so dramatically may even more drastically undermine the organization's ability to sell its service -- and it's already a tough sell.

Groupon is planning on spending dramatically less money through 2023, driving huge profit growth without strong sales growth.

Data source: Thomson Reuters. Chart by author. All numbers are in millions of dollars.

The bottom line for Groupon

There are just too many unanswered questions about Groupon's plans to reshape itself into something smaller yet more profitable. Most investors would be wise to steer clear until there's more clarity and stronger evidence of a turnaround.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.