Groupon reported earnings today, and the reaction from investors after the market closed was bullish. Less than an hour after results were released, the stock was trading up 16.66 percent. The focus was on revenues and operating income beating expectations.
What caught my eye, first however, was the guidance the company was giving:
“Revenue for the second quarter 2012 is expected to be between $550 million and $590 million, an increase of between 40% and 50% compared with the second quarter 2011.”
Now, 50 percent growth isn’t so bad. But it is much lower than the 89 percent growth year-over-year Groupon had in the 1st quarter. And that “$550 million and $590 million” outlook means revenue could be down, or flat from the 1st quarter. Of course, it may also increase, but still, these numbers seem to allow one make the case that Groupon’s revenue growth is loosing some steam.
Investors, on the other hand, seemed confident that things have brightened for Groupon. We’ll see.
But, as Wall Street Cheat Sheet notes:
“Expectations for the company’s performance in the upcoming quarter are lower than they were ninety days ago. Over the past three months, the average estimate for the second quarter has fallen from a profit of 7 cents per share to a loss of 3 cents. Over the past ninety days, the average estimate for the fiscal year has fallen from 31 cents per share to a loss of 5 cents.”
During the conference call, CFO Jason Child reiterated the Q2 outlook and said the company would “continue to deepen the competitive moats” around the company, by investing in technology and marketing, particularly in international markets.
Certainly the company is hungry for some good vibes, given that it stock continue to trade well below its $20 IPO price, and took a psychic hit with its accounting restatement. Still, it’s another example of just how hard it is to understand what is likely to drive investor behavior and how they evaluate these emerging businesses.