Wed, Aug 15, 2012 - Page 15 News List

Groupon stock dips despite a sound quarterly income

CAUTION AHEAD:The company’s lower-than-expected sales guidance renewed concern about its business model and accounting methods


Online shopping deals giant Groupon on Monday posted a sound quarterly profit, but saw its stock tumble nearly 20 percent due to a disappointing forecast for the months ahead.

The Chicago-based firm reported a profit of US$28.38 million on revenue that climbed 45 percent to US$568.3 million in the quarter ended on June 30.

“We had a solid quarter despite challenges in Europe and continued investment in technology and infrastructure,” Groupon CEO Andrew Mason said. “We’ve deepened our relationships with a growing base of merchants and customers worldwide.”

However, investors were unhappy that revenue was lower than analysts’ forecasts of US$574.8 million. For the quarter ending September, the company forecast revenues of between US$580 million and US$620 million. The midpoint was below the US$605.5 million expected by analysts.

Groupon shares fell more than 20 percent to a new low, but regained some ground, down 19.74 percent to US$6.06 in after-market trading on the NASDAQ.

The company made its stock market debut at US$20 per share in November and peaked above US$31 dollars a share.

Groupon shares were listed on the NASDAQ on Nov. 4 in a blockbuster public offering that raised a whopping US$700 million and triggered fears that investors may be foolishly overvaluing hot Internet startups.

The company has enjoyed phenomenal growth since its founding in 2008, but has been dogged by questions about its business model and accounting methods.

Groupon makes its money by selling members deals for discounts on activities, items, or services and then splitting the money with the businesses involved.

Revenue in North America was 66 percent higher than in the same quarter a year earlier, but Groupon took in more than half its revenue outside the US where exchange rates worked against the Chicago company.

Groupon reported having 38 million active and customers more than 100,000 merchant partners at the end of the quarter.

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