Investors Have Lost Faith in Groupon

Groupon Inc (NASDAQ: GRPN)

Groupon has been struggling in the market for quite some time. In fact, since about two weeks after the company launched its IPO, the stock has been falling dramatically. Now, it’s falling more, and for good reason. The company recently reported its financial data from the previous quarter. While revenue and earnings both came ahead of expectations, the expectations were already set incredibly low. Today, we’ll talk about what we saw from the report, how investors reacted to the news, and what we can expect to see from GRPN moving forward. So, let’s get right to it…

GRPN Reports Earnings

As mentioned above, Groupon recently reported its earnings, disappointing investors. Here’s what we saw from the report…

  • Revenue – While revenue was disappointing overall, it was the most positive part of the earnings report. During the quarter, analysts expected that the company would generate $708 million in revenue. However, GRPN actually reported that it generated $732 million in revenue. At first glance, this seems great. After all, the company did report earnings well ahead of expectations. However, when you dig into the details, things aren’t quite as positive. The reality is that this figure proves that revenue is declining at the company. In fact, year over year, the revenue generated represents a decline of 2.5% overall.
  • Earnings – When it comes to earnings, GRPN also generated a figure that was ahead of analyst expectations. During the quarter, analysts expected that the company would generate a loss of $0.08 per share. However, the company actually reported that it generated a loss of $0.06 per share, $0.02 ahead of expectations.

How Investors Reacted To The News

As investors, we know that the news moves the market. Any time there is positive news released with regard to a publicly traded company, we can expect to see gains in the value of the stock associated with the news. Adversely, negative news generally leads to negative movement. In this particular case, when compared to analyst expectations, Groupon did incredibly well. After all, the company came in far ahead on revenue, and beat earnings by a third. However, a deeper look into GRPN raises big concerns. The reality is that the company is seeing declines in sales on a year over year basis. This is a major concern. At the end of the day, if this trend continues, the stock is only going to tank further. As a result, we’re seeing declines in the value of the stock today. Currently (1:45), GRPN is trading at $3.84 per share after a loss of $0.59 per share or 13.43% thus far today.

What We Can Expect To See Moving Forward

Moving forward, things aren’t looking too great for Groupon. As the company continues to struggle to generate growth in sales, we’re likely to see further declines as investors continue to lose faith. At this point, there is hope that Jack Ma may purchase the company. However, without that happening, chances of investors realizing gains in the long run are relatively slim. All in all, I’m expecting to see further declines on GRPN.

What Do You Think?

Where do you think GRPN is headed moving forward and why? Let us know your opinion in the comments below!