Why Groupon Shares Got Crushed
Aug 14th 2012 10:53AM
Updated Aug 14th 2012 10:58AM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of "daily deal" specialist Groupon (NAS: GRPN) plummeted 24% today after its quarterly results and outlook missed Wall Street expectations.
So what: Groupon's second-quarter profit managed to squeak past estimates, but a miss on the top line -- revenue of $568.3 million versus the consensus of $575.3 million -- coupled with downbeat guidance for the current quarter reinforces concerns over a maturing market for daily deals. Management cited weak economic conditions in Europe and unfavorable currency movements for the disappointing outlook, suggesting that the company is struggling to find new regions of growth as daily-deal demand wanes.
Now what: Management now sees third-quarter operating income of $45 million-$65 million on revenue of $580 million-$605.5 million, versus Wall Street's view of $76 million and $605.5 million, respectively. "We want to give ourselves room to make the appropriate investments to really continue to make what is a significant portion of our business to feed," CFO Jason Child reassured analysts in a conference call. "And so we want to give ourselves room with that kind of uncertainty, and we feel like that the forecast that we've put forth kind of accurately reflects that uncertainty and the ability to make those investments." Of course, when you consider the faddish nature of Groupon's business model, worrisome sales trends, and increasingly fierce competition in the space, there's still too much uncertainty for conservative investors to handle.
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The article Why Groupon Shares Got Crushed originally appeared on Fool.com.Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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