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Groupon Shares Sink after Q2 Results (GRPN)

Despite posting better-than-expected second quarter earnings, the daily deals website, Groupon Inc.’s (NASDAQ: GRPN) shares slumped in aftermarket hours on Monday as its quarterly revenue missed estimates.

Ever since Groupon went public in last November, it’s been a bumpy ride for the company. On Monday, shares touched their nadir at $6.05 in after hours trading.

Just like many other companies, Groupon also blamed its flagging revenues to stagnating Europe. Nevertheless, as its stock plunged 20% on Monday, investors are now worried over its slowing growth.

For the quarter, the company reported second-quarter earnings (after excluding onetime expenses and other items) of 8 cents per share on revenue of $568 million. The company forecasted its revenue in the range of $550-$590 million for the same period.

Analysts polled by Thomson Reuters had predicted earnings of 3 cents a share (after excluding expenses) on revenue of $ 573 million.

In the preceding quarter, Groupon lost 23 cents per share on revenue of $392.6 million.

Net income stood at $28.4 million, or 4 cents per share, after adjusting a charge of $25.4 million for stock-based compensation and expenses related to some acquisitions.

Commenting over the results, Groupon’s Chief financial Officer, Jason Child, in a conference call said that both weakness in the European economy and unfavorable currency exchange market dented revenues from international market. However, he added that company was working hard to improve its performance in the region (Europe).

For the current quarter, the company expects revenue between the range of $580 million and $620 million even as Wall Street analysts’ estimated revenue of $ 604 million, for the period.

Meanwhile, the company has also made some changes in accounting procedure from the second quarter.  From the second quarter onwards, revenue statement will now also include third-party revenue, which is linked to sales for which Groupon operates as an agent for the merchant, as well as direct revenue.

Nevertheless, there is a concern over this accounting method. Analysts believe that with this system there is every chance of falsely getting overall revenue inflated. This is because; should Groupon take into consideration only that revenue in which it operates as an agent, the company, in effect,  is only getting a fraction of the revenue.

This is not the first time when Groupon is facing problems related to how its accounts for revenue. Back in March, the company had to revise its fourth quarterly results, citing “material weakness” in its financial statements.

 


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