Monday, August 13, 2012

All Eyes On Groupon Inc (NASDAQ:GRPN) Results, Trade with Caution

The market is keenly awaiting the second quarter results of daily deals site Groupon Inc (NASDAQ:GRPN) on Monday after market closes, amidst concerns about its future growth prospects.

Investors are uncertain how the company will sustain its revenues with its format of daily deals that may have reached saturation points. Investors have also been questioning how the company plans to account for its new business ventures such as Groupon Goods.

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“The big question is whether we are starting to see deal fatigue come into effect, so I think a lot of focus will be on their top line,” Evercore's Ken Sena told Dow Jones' Marketwatch in an interview

Groupon is also facing the severe backlash that social media sites have been facing in the last few months over their declining fortunes and their inability to provide clarity about their profitability margins and revenues

Shares of Groupon have dropped nearly two-thirds from their IPO price of $20 a share in November last year. The shares rallied briefly following its results in May but then have languished again.

On Friday however Groupon shares were up 12 percent with Morgan Staley releasing an upbeat note on the company. Most of Wall Street brokerages are mantaining their neutrsl rating on the stock. Now, the stock is up another 5% to $7.82, although well off session high of $8.05.

Scott Devitt of Morgan Stanley said on Friday, that the company will meet or beat Wall Street’ estimates for the period.

How Should Investors Trade GRPN Ahead of Earnings, Find Out Here

He cited data from Yipit that suggests a 16 percent rise in North America deals offered, and argues that deals offered is a “more precise statistic” to measure the health of the business than just revenue or gross billings.

"This growth shows Groupon is improving deal density, and can thus provide superior inventory and targeting to customers,” Devitt wrote.

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