Groupon Inc (GRPN) Earnings Preview: Weak Guidance Expected

Groupon earningsBy GrouponRUS (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Groupon Inc (NASDAQ:GRPN) is scheduled to release its next earnings report tomorrow after closing bell. Analysts aren’t really expecting any surprises from the daily deals giant’s first quarter results, although they say it’s possible that the company will guide for a weak second quarter because of a weaker industry and continued investments

What to expect in Groupon’s earnings report

In a report dated April 29, 2014, Ascendiant analyst Edward Woo said he expects Groupon Inc (NASDAQ:GRPN) will report losses of 2 cents per share on $751 million in revenue. Consensus estimates suggest losses of 3 cents per share on $738 million in revenue. The daily deals giant guided for revenue of between $710 and $760 million and losses of between 4 cents and 2 cents per share.

The analyst believes that Groupon Inc (NASDAQ:GRPN) continues to see strong growth in its Goods segment because of recent acquisitions. However, he thinks declines in the daily deals industry during the first quarter will offset that growth. In terms of guidance, he expects management to guide below consensus estimates, which are currently at 3 cents per share in earnings and $754 million in revenue.

Groupon’s outlook improves

He remains cautious on Groupon Inc (NASDAQ:GRPN), although said the company’s outlook is improving slightly. He states that the company has stabilized and also improved its U.S. business, although he sees continued uncertainties in the company through staff turnover, higher investments and competition. Groupon did say the first quarter and all of this year would be weak because of the acquisitions of Ideeli and Ticket Monster, which it expects to weight on earnings this year. The company projected a $20 million impact on its first quarter. Also as the company shifts from a push business model to a pull model will likely continue to temper revenues for now.

Groupon Inc (NASDAQ:GRPN)’s stock has been highly volatile of late, as the company’s weaker guidance pushed shares about 30% lower since the fourth quarter results were reported in February. Woo isn’t yet convinced that the company is consistently moving toward profitability and growth and suggests that its stock price will remain volatile and weak until the company shows consistent growth.

He continues to see Groupon Inc (NASDAQ:GRPN)’s valuation as unattractive, so he is maintaining his Sell rating and $7 per share price target on the stock.

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at Mjones@valuewalk.com.