Groupon Inc shares were in freefall on Friday morning after the firm’s earnings numbers for the three months through June fell below Wall Street’s forecasts. The coupon maker showed earnings per share of 2 cents for the three months. Wall Street was looking for EPS of 3 cents. At time of writing shares were down 5.98 percent in pre-market trading to $4.40.
Groupon shares haven’t seen lows like that since the slide that followed its 2012 IPO. The firm’s shares have now lost more than 40 percent of their value since the start of 2015. Groupon is joined by Yelp Inc and Twitter Inc [qm q=”TWTR” m=”NYSE” c=”Twitter” on the growing list of causalities from the June earnings season.
Groupon fails to grow
Groupon CEO Eric Lefkofsky tried to talk down the firm’s earnings slump. He said that “Our marketplace transition continues to gain steam as we delivered another solid quarter.” He added that “all of our businesses in North America and abroad are now growing.”
That growth only exists if you ignore the currency shifts that have happened in 2015. Groupon showed non-GAAP earnings per share of 16 cents. That number was driven down after counting up the actual exchange rate and other charges taken during the three months through June 30.
Groupon showed sales of $738.4m for the three months. Wall Street was looking for around $756m in sales this time around.
Groupon also guided for weaker EPS for the current quarter. That’s not a surprise given the impact that foreign exchange rates are having on business. The firm said that it expects to earn between $0 and $0.02 per share in the three months through September. That’s far below the $0.03 Wall Street thought the firm could manage.
Groupon joins tumbling tech earnings
This earnings season has been a weird one in the world of tech. The firm, like Google Inc, Netflix, Inc. and Amazon.com Inc., that did well were rewarded to the extreme on Wall Street. Firms like Twitter Inc, Yelp Inc and Groupon Inc that failed to meet Wall Street’s forecasts were punished hard.
Groupon has been punished harder than most. It seems that Wall Street is weeding out the tech firms traders don’t think are going to make it in the years ahead right now. Many, judging by moves this morning, are betting that Groupon is in that pack.
Not everyone is of the same mind. Justin Post, a Bank of America analyst who rated the firm at Buy ahead of the report, reckoned saw the firm’s “risk/reward as attractive and believe that double digit N. America local billings growth and N. America Goods gross margin trajectory are reasons for optimism.”
Brean Capital analyst Tom Forte put a $11 price target on the firm in a July 31 report. He said that there were three reasons to Buy the stock. The first was the chance of “sustained North-American daily deal growth,” the second was the firm’s growing portfolio of services, and the third was its low valuation.
We’ll have to see how Wall Street research houses respond to this morning’s report, but Mr. Forte should, at the very least, be able to stand behind his comment on Groupon valuation.
If shares were attractive on July 31, they might be even more appealing now. Shares have dropped more than 6 percent since he put his $11 price target on the firm.