Groupon Stock Plummets as Company Misses Revenue Expectations

Groupon Stock Plummets as Company Misses Revenue Expectations
By GrouponRUS (Own work) [CC BY-SA 4.0], via Wikimedia Commons

The stock value of Groupon Inc (NASDAQ:GRPN) plummeted more than14 percent minutes after the company released its second quarter earnings report, despite its strong performance. According to analysts, investors reacted negatively because its revenue missed street expectations.

Groupon Stock Plummets as Company Misses Revenue Expectations

Groupon Inc (NASDAQ:GRPN) reported $568.3 million revenue during the second quarter of the current year. The result is 45 percent higher than its $392.6 million revenue during the same period in 2011. However, its current revenue is lower than the $573 million average analysts estimate, based on the data compiled by Thomson Reuters.

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Its net income was $28.4 million or 4 cents per share, compared with its $107.4 million net loss during the second quarter in 2011. Groupon Inc (NASDAQ:GRPN) also reported a $45.6 million operating income compared with the $101 million operating loss incurred by the company a year ago.

According to the company, its operating cash flow climbed to $75.3 million, 93 percent higher than its $39 million operating cash flow in 2011. For the past twelve months ending in June 30, its operating cash flow was $392.5 million. Its free cash flow during the second quarter was $48.6 million, while its twelve months free cash ending in June 30 was $330.1 million, a 234 percent increase from its $96.4 million free cash flow in June 30, 2011.

In a statement, Andrew Mason, CEO of Groupon, said, “We had a solid quarter despite challenges in Europe and continued investment in technology and infrastructure. We’ve deepened our relationships with a growing base of merchants and customers worldwide, demonstrating progress as we work to unlock the opportunity in local commerce.”

Last Wednesday, Arvind Bhatia, analyst from Sterne Agee downgraded the company from buy to neutral. According to him, Groupon’s accounting on revenue on goods is “appropriate,” but it is mixed with its other business segments, and it seems the company is “artificially boosting revenue growth.”

Groupon Inc (NASDAQ:GRPN) changed its method in calculating its second quarter revenue this year. The company included third-party revenue in presenting its consolidated revenue. According to analysts, the new method is questionable, regarding whether the company is erroneously inflating its overall revenues. The company revised its fourth quarter earnings report after committing “material weakness” in its financial statement. Groupon Inc (NASDAQ:GRPN) expects to achieve $580 million to $680 million revenue for the third quarter this year.

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