Groupon Gets Clipped to New All-Time Lows

Groupon (NASDAQ:GRPN) continues to put space between its initial public offering price and its current stock price. Shares of the daily deals company plunged after releasing disappointing financial results for the recent quarter.

The Chicago-based company posted a net loss of $2.98 million (0 cents per share) for the third quarter, which includes stock-based compensation and acquisition-related expenses of $25.1 million. The net loss was better than last year’s $54.2 million debacle, but analysts were expecting positive earnings of 3 cents per share.

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Groupon’s gross billings, which reflect the total amount it receives from customer purchases, excluding taxes and estimated refunds, increased 5 percent to $1.22 billion, compared to $1.16 billion last year.Revenue for the third quarter was also a disappointment with $568.6 million, compared to Groupon’s own guidance of $580 million to $620 million. Analysts expected revenue of about $591 million, according to FactSet. Revenue grew 32 percent in the period, but that compares to 45 percent growth in the prior quarter and almost 90 percent growth in the first-quarter of this year.

North American revenues showed a healthy 81 percent increase, but international growth lagged with only a 3 percent gain, or 13 percent excluding foreign exchange impacts. As the chart below shows, Groupon has been decreasing its marketing spend as a percentage of revenue since last year due to new and more efficient methods. However, the company noted on the conference call that it expects marketing spend to “ramp” as it tries to attract more customer activation in more developed markets. In the third quarter, Groupon reduced its marketing spend by 58 percent year-over-year.

Active customers in the third quarter totaled 39.5 million, representing a 37 percent increase from last year. However, growth has been slowing due to the weakness in Europe. Quarter-over-quarter, active customers grew only 4 percent and appears to be stalling. Jason Child, chief financial officer, explains on the conference call, “Approximately for customer spend, as measured by the trailing 12-month billings per average active customer, it declined 21 percent year-over-year to $149 on a global basis, largely driven by the softness in international.”

Investors did not react well to the results. Shares of Groupon crashed more than 29 percent in Friday trading, hitting a new all-time low below $2.71. Despite going public at $20 a share last November, the stock has plummeted 90 percent year-to-date.

Looking forward, Groupon expects fourth quarter revenue to come in between $625 million and $675 million, higher than the consensus of $635 million on Wall Street. Although the company is not trying to be the next Amazon (NASDAQ:AMZN), it remains upbeat on its new Groupon Goods business, and believes search is a large untapped market since roughly 25 percent of the queries on Google (NASDAQ:GOOG) and Microsoft’s (NASDAQ:MSFT) Bing are local.

Groupon is also building tools for small businesses to expand its reach. These include Groupon Scheduler, Groupon Rewards and Groupon Payments. The company also recently launched Breadcrumb, an Apple (NASDAQ:AAPL) iPad point-of-sale solution for restaurants.

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