Why Groupon Shares Got Crushed
Feb 28th 2013 2:53PM
Updated May 23rd 2013 5:05PM
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 plummeted 19% today after its quarterly results and outlook missed Wall Street expectations.
So what: Groupon's fourth-quarter revenue managed to grow 30%, but a surprise loss of $0.01 per share -- versus Wall Street's view of a $0.03 profit -- coupled with downbeat guidance reinforces the belief the daily deal market is rapidly deteriorating. While market share and gross billings grew during the quarter, management had to lower its "take rate" and sacrifice profitability to do it, underlining concerns over Groupon's competitive position, as well.
Now what: Management now sees first-quarter revenue in the range of $560 million and $610 million, a year-over-year increase of 0% and 9%, which is well below the average analyst estimate of $650 million. "We will continue to invest in growth through 2013 as we see new opportunities to give our customers what they want," CEO Andrew Mason reassured investors. But until those opportunities translate into visible margin expansion, expect the stock to remain under heavy pressure.
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Groupon's story is one of the American Dream. The company went from 400 subscribers in 2008 to over 150 million today. While this story is definitely one of triumph on a business level, its success most certainly hasn't been shared by investors. Company shares have fallen over the past year and left investors panicked. Will this company live out its American Dream, or leave shareholders empty-handed? In order to answer that question, our analyst has compiled a premium research report with in-depth analysis on whether you should buy or sell Groupon right now, and why. Simply click here now to get started.
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