Groupon plunges on disappointing earnings
Will the deal site, which rejected a bid from Google in 2010, ever get its act together?
The Chicago company, which Thursday reported worse-than-expected results, now has a market value of $1.97 billion. Its shares have plunged more than 85% this year, and are down more than 27% Friday.
Groupon reported a net loss of $2.98 million, or 0 cents, an improvement over a loss of $54.2 million, or 18 cents a year earlier. Revenue rose more than 32% to $568.6 million. The company was expected to earn 4 cents on sales of $633.9 million. Much of the shortfall seems to have come from overseas, where there have been "execution issues," according to Mason.
"Some people have expected a quick turnaround in Europe," said Sameet Sinha, an analyst with B. Riley, in an interview with Bloomberg News. "What they don't understand is it's a huge task."
Groupon Goods, an e-commerce site, has reached $500 million in revenue. While growing at a faster rate than the deals business site, it has lower profit margins. The deals business has its own problems. Advertisers are complaining that partnering with Groupon costs them money and does little to promote their brands. Their skepticism will continue.
Fourth-quarter revenue is expected to be between $625 million and $675 million. Wall Street, though, still has faith in Groupon. The average 52-week price target on the stock is $7.19, more than 150% above where it currently trades.
Unfortunately, it seems unlikely that Groupon will breach the huge gap between its reality and Wall Street's lofty expectations.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.
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Consumers are very status conscious in Asia, Africa and other emerging-market areas. This is especially true in China.
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