Groupon Inc (NASDAQ:GRPN) posted mixed results last night, but overall, investors were quite disappointed. Sterne Agee analysts have cut their estimates for the daily deals giant, although they remain Buy-rated with a $12 per share price target. They see Groupon as being attractive for longer-term investors.

Groupon

The good and the bad in Groupon’s earnings

In a report dated Aug. 6, 2014, analysts Arvind Bhatia and Brett Strauser said the company’s earnings report last night seemed to be “mediocre to slightly disappointing” on the surface. However, they still see Groupon making progress on its turnaround efforts. They said the progress they were hoping to see in the second quarter was “mostly there.

The company posted $752 million in revenue, compared to the consensus estimate of $762 million. Adjusted EBITDA was in line with consensus at $59 million, while billings were slightly ahead of consensus, coming in at $1.82 billion, compared to the estimate of $1.81 billion. Total monthly active customers hit 53.2 million, ahead of Wall Street’s estimate of 50.4 million. Groupon reported a take rate of 41.3%, which was slightly below the estimate of 42.1%.

Why like Groupon?

The company reported a slight increase in North America Local billings, which rose 35.7%, although a lower take-rate offset that. Local billings for the rejoin sped up toward the end of the second quarter and beginning of the current quarter. The Sterne Agee team also notes that Groupon saw better-than-expected improvement in gross margins for its Goods segment. In fact, they were close to hitting break even.

As a result, they believe Groupon is on track to hit its three targets by the fourth quarter. Those three targets are double-digit growth in North America billings, double digit gross margins in the Goods segment and break even on the rest of the world, excluding acquisitions.

The Sterne Agee team lowered their adjusted EBITDA estimate for this year from $301 million to $271 million. Next year’s estimate moves from $410 million to $323 million. The analysts say their reduction reflects higher spending on marketing.