Groupon Inc (NASDAQ:GRPN) missed expectations for revenue and guidance, reporting mostly negative results this time around. However, William Blair analysts believe the company is heading for recovery. Although they remain positively biased on Groupon, they’re looking for consistent growth in consolidated local billings and revenues to return before they become even more positive.


Shares of Groupon Inc (NASDAQ:GRPN) declined in early morning trading, falling 3%.

Groupon posts weak results

Analysts Ralph Schackart and Ryan Domyancic issued a report with their take on the company’s latest results. Third quarter revenue was $595 million, compared to consensus estimates of $615 million Revenue guidance for the fourth quarter was also low at between $690 million and $740 million compared to consensus estimates of $725 million. The company’s full-year guidance for operating income declined from more than $100 million to between $72 million and $92 million.

The company also missed on billings, reporting $1.343 billion, compared to consensus of $1.39 billion. In addition to reporting results, Groupon Inc (NASDAQ:GRPN) also announced it would buy Ticket Monster from LivingSocial. This has the potential to be a positive for Groupon, although Ticket Monster operates close to break even on EBITDA.

Groupon rated as Market Perform

The William Blair analysts have rated Groupon as Market Perform, saying they see progress in the company’s transition from a push business model to a pull model. However, they said progress in this area slowed down during the September quarter.

During September approximately 6% of Groupon’s total North American traffic was search activity on its website. During the whole quarter, direct email made up less than 40% of transactions in the region, indicating progress from the 45% reported in the first quarter.

Active North American deals rose to 65,000 during the third quarter, compared to 54,000 at the end of the June quarter and 40,000 at the end of the first quarter. Also 75% of merchants agreed to be featured in Groupon Inc (NASDAQ:GRPN)’s deal bank, which is in line with 75% during the second quarter.

Slowing progress in Groupon’s model shift

The analysts said although Groupon saw an increase in mobile app downloads, North American transactions flattened during the quarter. Global mobile app downloads were reported to be 9 million, pushing the company’s total downloads to more than 60 million. Groupon Inc (NASDAQ:GRPN) saw 7.5 million downloads during the second quarter and 7 million in the first quarter.

According to the company’s report, more than half of transactions in North America were done via mobile devices in September, an increase from a little under half in June. From now on, Groupon said it will report mobile transactions globally rather than individually.