Groupon Hits 52-Week Low after Q3 Results Miss Estimates (GRPN)

The shares of daily deals company Groupon (NASDAQ: GRPN), which reported fiscal 2012 third-quarter results after the market closed Thursday, fell over 20% at the opening of Friday’s trading session and continued its way downwards. While reporting a narrower loss for the third quarter of fiscal 2012, the company also gave its outlook for the fourth quarter of 2012.

The Illinois-based subsidiary of The Point LLC, Groupon operates a web-based marketplace that connects merchants and consumers in North America and worldwide. Groupon offers products and services at a discount. The modus operandi involves sending daily emails to its opt-in list. Based on the location and personal preferences of subscribers, discount offers for goods and services are sent. As an alternative, by accessing Groupon’s website or using mobile applications, consumers can become aware of the latest offers.

Total revenues for the fiscal 2012 third quarter increased 32% to $568.55 million from $430.16 million in the similar period last year. The revenue estimate of analysts was $590.12 million for the third quarter of fiscal 2012.

The net loss for the reported quarter narrowed to $2.98 million, or break-even per share, from $54.23 million, or $0.18 per share, in the third quarter last year. The earnings estimate of analysts was $0.03 per share for the comparable quarter of fiscal 2011.

In the third quarter, Groupon surpassed the 200-million subscriber mark. As of September 30, 2012, Groupon had 39.5 million active customers, an increase of 37% year-over-year.

Commenting on the results, Andrew Mason, CEO of Groupon, said, “Our solid performance in North America was offset by continued challenges in Europe. Groupon Goods has evolved into a second major category that our customers clearly love. With deals on everything from designer sunglasses to big-screen televisions to most-wanted toys, we think it will be a great gifting destination this holiday season.”

After going public in the early November 2011, Groupon hardly saw its share price firm up. On the other hand, a CNBC report published in the first week of January 2012 underlined the difficulty faced by Groupon in merchant retention. Following that was a Seeking Alpha story, which stated that investing in Groupon is not worth the risk. This series of negative events resulted in a fall of more than 9% in the share price to $17.81 within two days. Even though the company had remarkable growth rates, huge net losses kept investors at bay.

On Friday, the share price of Groupon opened with a wide negative gap of over 20% from the previous close of $3.92 per share. The unabated selling that followed took the share price to a new 52-week low of $2.71 on a volume eight times more than the three-month average of 14.5 million shares.

Groupon expects fiscal 2012 fourth-quarter revenue in the range of $625 million to $675 million. The fourth-quarter revenue guidance, in percentage terms, is 27% to 37% higher than the reported revenue for the fourth quarter of fiscal 2011. The revenue estimate of analysts currently stands at $633.87 million for the fourth quarter of 2012.

Including approximately $30 million of stock-based compensation, the company anticipates fourth-quarter income from operations to be between $0 and $20 million, compared with a loss from operations of $15 million in the fourth quarter 2011.

Groupon ended Friday’s trading session at $2.76 per share, down $1.16 or 29.6% on a volume of 116.3 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.