On Wednesday, Groupon (GRPN +4.01%) 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 (EBAY 1.96%) 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.
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