GRPN: Groupon Earnings Could Mark a Turning Point

Groupon (GRPN) is scheduled to report its third-quarter numbers after the closing bell rings on Thursday, and if Wall Street is right, Groupon earnings aren’t going to be particularly stellar.

Groupon stock GRPNThe latest forecasts by analysts polled by Thomson Financial Network call for Groupon earnings of just a penny per share — still technically a profit for GRPN, but not a great one. Indeed, other consensus estimates say the company is poised to lose 2 cents per share. Perhaps even more alarming is those subpar results for Q3 will plant yet another red flag in what’s become a concerning trend in Groupon earnings.

Groupon might be one of the market’s more recent remarkable disappointments. The November 2011 IPO was highly anticipated, fueled by clear growth in the organization’s daily online deal business.

As is all too often the case, though, Groupon stock never had a real shot at living up to the hype. GRPN opened as a publicly traded vehicle in late 2011 at $28 per share, and immediately began to tumble to the eventual low of $2.60, hit in November 2012.

Then again, it’s not as if shares were unduly punished — the Groupon earnings outlook was becoming increasingly dire during that time. The company didn’t begin turning a profit until the second quarter of last year, but by that time, it had already become clear that the GRPN business model wasn’t sustainable. Ergo, its profitability wasn’t either. The Groupon earnings reports went breakeven in the third quarter of 2012, then negative ever since.

This upcoming report, however, could be a turning point for GRPN.

Although there’s still clearly some debate as to whether this is the quarter we’ll see the digital deal name swing back to a positive earnings number, most everyone agrees that business has stabilized for Groupon, and that the losses are abating.

Groupon earnings improvement would largely be driven by stronger revenue, which analysts forecast to be $616 million for the third quarter of this year, up 8% from Q3 2012’s top line of $568.6 million. It’s also sequentially better; GRPN generated sales of $608.7 million in the second quarter of this year.

That’s not an insignificant feat, as the bigger revenue trend has up until this point suggested waning revenue growth; 2012’s third quarter was particularly weak compared to the second quarter.

In fact, if the Groupon earnings report does show a top line of $616.1 million for Q3, it will be the company’s best quarter in more than a year in terms of revenue.

Of course, for the market to view any of the Groupon earnings news as pivotal, much of it will hinge on the company’s outlook and the plausibility of the plans to reach those targets. As it stands right now, GRPN is expected to earn 28 cents per share in 2014, up from 2013’s 12 cents. Next year’s top line is projected to reach $2.95 billion, up from this year’s anticipated $2.55 billion.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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