Groupon Reports Loss, Shares Plummet

Joel Anderson  |

[caption id="attachment_12201" align="alignleft" width="230" caption="Andrew Mason, Groupon CEO"] [/caption]

Groupon (GRPN) reported a loss in its first earnings report since its November IPO, sending shares plunging over in after hours trading. The good news is that now you and all your friends can get shares in the Chicago, IL company for 15 percent off.

Revenues Strong, but Loss Disappoints

Much of the data in the quarterly report was actually strong. Revenues beat analyst estimates of $475 million by bringing in $506.5 million, and the number of active users rose 20 percent from last quarter to 33 million worldwide. However, this growth of users represented a significant slowing that could raise red flags, especially when one considers the relatively low projections for Q1 2012 revenues.

"That suggests there are fewer newer customers, consumer fatigue and the impact from lower marketing spending," said Sameet Sinha, an analyst at B Riley. "That means not enough people are buying groupons. ...Yes, you can get fewer people to buy more, but how long can that continue? You need to start investing in new customer growth."

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The revenue numbers also failed to excite investors. While beating expectations for revenue, the company still posted a loss of $0.08 a share. This is a huge year-over-year improvement from last year's $1.08 loss, but it's still behind expectations. On an adjusted basis, Groupon's loss comes to $0.02 per share, falling short of the $0.03 EPS projected by analysts polled by Bloomberg. Groupon projected revenue between $510 million and $550 million for Q1 of 2012, which beats analysts expectations of $501 million. However, this also represents a fairly flat growth rate for the company. All told, investors began an after-hours sell-off that pushed shares down about 15 percent.

Future Murky for Groupon

Groupon also reported a 22-percent decline in marketing costs and pointed toward high tax-rates overseas for its loss, indicating the those rates were a one-time cost and will significantly decrease in the future.

“Groupon had a strong fourth quarter and we finished 2011 having helped 250,000 local merchants across 47 countries grow their businesses while saving Groupon customers billions of dollars,” Groupon CEO Andrew Mason said. “We will continue to invest in new services and tools that help our merchant partners be more successful and drive local commerce around the world.”

Some analysts seem to think that Mason's optimism is founded as the strong revenue numbers appear to have been lost in the overall loss.

"The quarter looks fine. Some concern that the guidance looks flattish, sequentially. Maybe investors are looking for a little bit more growth on a sequential basis," said Herman Leung, an analyst with Susqehanna Financial Group. "Pretty solid growth domestically for revenues."

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