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Analyst Blog

Groupon Inc. (GRPN - Analyst Report) is scheduled to release its fiscal second quarter 2012 results after the closing bell on August 13, 2012. In the run up to the earnings release we do not notice any significant estimates revision by the analysts covering the stock.

Previous Quarter Highlights

Groupon reported better-than-expected first quarter results. Quarterly revenue of $559.3 million soared 89.0% year over year, driven by higher gross billing and steady increase in the number of active customers.

Groupon’s quarterly loss per share (including stock based compensation) of 2 cents was narrower than the Zacks Consensus Estimate of a loss of 4 cents. Strong revenue growth and lower marketing expense drove the quarterly result.

For further details please read: Groupon Posts Profit in 1Q

Estimate Revision Trend

In the last 30 days, out of the 12 analysts covering the stock, only one downward revision was noticed. The Zacks Consensus Estimate for the second quarter was pinned at a loss of 2 cents per share over the same period.

Analysts expect expansion of the paid-user base to positively impact the company’s top line. Moreover, higher gross billing on a year–over-year basis is expected to drive revenues.

However, currency fluctuations (owing to weak euro) remain a headwind.

Recommendation  

We believe that Groupon is well positioned to gain from increasing e-commerce spending on mobile devices, profitable domestic market and an under penetrated international market. We expect these opportunities to continue to drive top-line growth going forward. Moreover, Groupon enjoys a first-mover advantage in the daily deals market based on its well-recognized discount coupons.

However, we believe that the market is getting more competitive due to the growing interest from technology stalwarts such as Amazon.com Inc. (AMZN - Analyst Report) and Google Inc. .

Moreover, we believe that Groupon need to earn profits on a consistent basis for the next couple of quarters to gain confidence of its jittery investors. Until that happens, we prefer to remain Neutral on the stock over the long term.

Currently, Groupon has Zacks #3 Rank, which implies a Hold rating in the short term.

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