Groupon results to key on new sales efforts

 

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Feb. 27, 2013, 6:00 a.m. EST

Groupon’s results to key on new sales efforts

Stock has surged from its low as Street sentiment has improved

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By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) — Groupon Inc. is scheduled to report fourth-quarter results on Wednesday afternoon, and investors are expected to focus on the daily-deal company’s progress in direct and international sales.

Reuters

Groupon CEO Andrew Mason

Analysts surveyed by FactSet estimate Groupon (NASDAQ:GRPN) will earn 3 cents a share on revenue of $639.8 million for the quarter ended in December. During the year-ago period, Groupon lost 6 cents a share on $492 million in revenue, after the company revised its fourth-quarter results to reflect increases in its reserve fund, largely for refunds on higher-priced items.
After a year in which Groupon’s stock price fell to as low as $2.60 a share, on Nov. 12, the shares have bounced back of late, benefiting from analyst upgrades and better sentiment about its Groupon Goods business. Since the end of 2012, Groupon’s shares have risen more than 12%, closing Tuesday at $5.55.
Gene Munster, of Piper Jaffray, upgraded Groupon’s stock to an overweight rating from neutral last week, and set a price target of $8 a share. In a research note, Munster said he expects Groupon’s results and its outlook to show continued strength in its North American business, as well as improvements in the company’s international business trends following two quarters of decreases.

/quotes/zigman/7212269/quotes/nls/grpn GRPN 4.95, -1.03, -17.22%

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Munster said he believes Groupon has begun employing some of the procedures it successfully used in the U.S. in its foreign markets, “which should drive international daily deal sales alongside increased goods sales.”
He also noted that, “as Groupon promotes itself as more of a destination Website, sales should become less dependent upon push emails.”
Sterne Agee analyst Arvind Bhatia also upgraded Groupon’s stock to buy rating this month, setting a price target of $9 a share. Bhatia sees signs of stability in Groupon’s daily deal offerings, as well as increases in direct revenue among the main drivers of the company’s results as it moves toward relying more on search engine-and-direct site traffic for its business.
“Our view is the company’s evolution beyond its core push email business to pull will ultimately prove successful,” Bhatia wrote in a note on Monday. “Competition is easing a bit and we believe underscores how Groupon’s scale is a real advantage in a business with low barriers to entry.”

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Are Groupon’s shares a deal?

Groupon reports on Wednesday. Heard on the Street's Rolfe Winkler joins digits with his take on whether the stock is a deal itself.

Doug Anmuth of J.P. Morgan noted in a report last week that “sentiment in the name has improved significantly since the November lows as expectations for the local deals e-mail segment have been reset and Groupon likely continues to gain traction in mobile.”
However, the analyst remains neutral on Groupon, writing that “we believe users are likely feeling some degree of email and deal fatigue, thereby slowing growth in the local deals space.” Of Groupon Goods, he noted that “this is a less differentiated business and we think there are better ways to invest in e-commerce.”