Will Groupon (GRPN) Disappoint this Earnings Season Again? - Analyst Blog

By Zacks Equity Research,

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Groupon Inc. ( GRPN ) is set to report first-quarter 2014 results on May 6, 2014. The company has posted an average negative earnings surprise of 311.1% over the past four quarters. Year-to-date, Groupon's share price has plunged 40.2% compared with 2.7% increase in the S&P 500.

Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Groupon is well positioned to gain from the rising e-Commerce spending on mobile devices, a profitable domestic market and an under-penetrated international market. Moreover, increased traction in the mobile business is another positive for the company.

For the first quarter of 2014, Groupon forecasts revenues in the range of $710.0 to $760.0 million, which includes $50.0 million revenue contribution from the acquired businesses of Ticket Monster and Ideeli, completed in Jan 2014. The Zacks Consensus Estimate for revenues is currently pegged at $741.0 million.

Both the acquisitions are expected to negatively impact adjusted EBITDA by $20.0 million. Groupon expects EBITDA in the range of $20.0 to $40.0 million for the quarter. Management also stated that marketing expenses will increase approximately $25.0 million.

Groupon expects to report loss of 4 cents to 2 cents for the first quarter of 2014. However, this guidance is narrower than the Zacks Consensus Estimate of a loss of 7 cents.

We note that in North America, the company continues to face significant competition not only from stalwarts like eBay ( EBAY ) and Amazon ( AMZN ) but also from small companies like LiveDeal ( LIVE ) , which is a major headwind in the near term.

Earnings Whispers?

Our proven model does not conclusively show that Groupon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP : Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents. Hence, the difference is 0.00%.

Zacks Rank : Groupon's Zacks Rank #3 (Hold) when combined with 0.00% Earnings ESP makes surprise prediction difficult.

We caution against stocks with Zack #4 and 5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

AMAZON.COM INC (AMZN): Free Stock Analysis Report

EBAY INC (EBAY): Free Stock Analysis Report

GROUPON INC (GRPN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: AMZN , EBAY , GRPN , LIVE

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