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John Burfisher/Medill

Groupon Inc.'s stock plummeted Friday after the daily deal giant reported disappointing revenues.


Investors mark down Groupon shares as revenues disappoint

by John Burfisher
Nov 09, 2012


Groupon Inc. shares plummeted nearly 30 percent Friday to a fresh low after the company reported weaker-than-expected revenue in the third quarter due to a sluggish European economy. The loss, reported after Thursday’s stock market close, came as the Chicago-based company announced it would lay off 80 sales employees.

Groupon shares closed at $2.76 per share, down 86 percent from its initial public offering price of $20 almost exactly one year ago.

The daily coupon giant reported a third-quarter loss of $2.98 million, or break-even on a per-share basis, up from a loss of $54.2 million, or 18 cents per diluted share, from the same period a year ago. Analysts surveyed by Bloomberg expected a penny loss.


Revenues rose 25 percent to $568.5 million from $430.1 million a year ago, but fell short of the Wall Street estimate of $590.9 million.

“Their core product is not doing well. It’s declining,” said Edward Woo, an analyst from Ascendiant Capital Markets LLC. “For the near term it’s going to be tough to overcome the challenges.”

Woo said  many companies are offering the same exact service, so it’s not as new and fresh as it was a year ago and customers are finding out they aren’t using all the coupons they purchase from Groupon.

Europe’s sluggishness was a key culprit behind disappointing revenues, according to Groupon. “With a weak European economy we could not grow our business,” said CEO Andrew Mason in a conference call with analysts.

Gross billings for the international segment fell 12 percent in the quarter to $665.8 million from $756.2 million in the year-ago period.

Still, Mason assured investors that fourth-quarter revenues would come in between $625 million and $675 million. Wall Street analysts have estimated revenues of $635 million for the final three months of the year.

Mason said local searches make up half of all search queries on mobile phones, which should benefit Groupon tremendously as it seeks to shift its business to mobile from e-mail inbox solicitations.
The company also offers Groupon Goods, which allows customers to search and find deals rather than Groupon picking a daily deal for the customer.

Analyst Woo said although it is smart for Groupon to move to mobile applications from the internet, it is too early to tell how the transition will play out.

In the first nine months of the year, Groupon swung to a profit of $13.7 million, or two cents per diluted share, from a loss of $308.16 million, or $1.01 per diluted share. Revenue rose 34 percent to $1.7 billion from $1.12 billion a year ago.