Groupon Shares up on Potential Earnings Surprise
Groupon (NASDAQ: GRPN) is scheduled to release second quarter earnings results after market close Monday. The stock has been lambasted by traders since its IPO, losing over 60 percent of its value, but signs of stabilization and a short squeeze Friday propelled shares up more than 10 percent.
Throughout July, Zack's Consensus Estimate held steady and of the thirteen analysts covering Groupon, only one had a downward revision. Analysts are expecting a two cents per share loss over the same period last year.
Last quarter's report exceeded expectations as revenue was up 89 percent to $559.3 compared to the same period of 2011. The e-commerce marketer back in May raised its income from operations to be between $25 and $45 million compared to a loss of $10.1 million in the second quarter last year.
The stock has been under pressure since it dubious debut last November. Besides its inflated valuation, the company's flawed business model and suspicious accounting practices have come into question.
Regulators have previously questioned Groupon's accounting practices, as the company stopped reporting a controversial financial metric called Adjusted Consolidated Segment Operating Income in 2011.
Groupon has been under fire since it increased the size of its IPO to raise $700 million and a market value of $13 billion. At the time of the stock's debut, the company was the second largest internet IPO since Google (NASDAQ: GOOG) raised $1.7 billion in 2004. When the smoked cleared, investors, insiders and analysts questioned Groupon's ability to sustain growth.
In the long run, competition from internet giants Google and Amazon (NASDAQ: AMZN) may slowly but surely erode Groupon's customer base. Faced with companies that have deep pockets and a vast reach, Groupon may find it increasingly difficult to keep investors content.
To the company's credit, the Groupon Goods business growth was estimated at $50 million per quarter since the division's inception. "I can see it becoming a really good, big business for them," Sameet Sinha, analyst at B. Riley & Company told Reuters. Sinha still sees controversy ahead with Groupon's accounting issues.
Groupon shares continue to rise up another 3.5 percent on top of Friday's double digit percentage gain. The stock has been beaten down over the past three months losing 40 percent of its value. With plenty of bad news already baked into the stock the recent bounce could have further legs after today's report.
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