For the third-quarter, Groupon expects revenue ranging between $580 million and $620 million, with income from operations pegged between $15 million and $35 million. The average analyst view is for earnings of 5 cents per share on revenue of $604.5 million.
Even though third-quarter revenue guidance was weak, the real focus is Groupon's slowdown in billings, which fell to $1.29 billion in the second quarter. That's up from $929.2 million in the same period a year earlier, but down sequentially from $1.35 billion in the first quarter. The company blamed foreign-exchange rates for the shortfall, but there's more to it than this, says Citigroup analyst Mark Mahaney.
Mahaney noted that the thesis on Groupon has changed, largely in part to gross billings declining for the first time ever. He noted that macro issues in Europe are partly to blame, but said "Daily Deal maturation has to be a factor." The analyst also cited the fact that active customers only grew 3% quarter-over-quarter, again suggesting daily deal maturation. He downgraded shares from "buy" to "neutral," and lowered his price target to $9 from $19.Some analysts have gone so far as to say the daily deal business has run into a wall, and that the weak trends are likely to persist. Benchmark analyst Clayton Moran downgraded Groupon, which competes with Amazon (AMZN), Living Social and Google (GOOG) in this space, to "hold" on this basis. With shares down 63.4% year-to-date, the market appears to be confirming this. "2Q12 subscriber growth slowed meaningfully. Gross billing per subscriber dropped materially. This drove gross billings down sequentially..," Moran wrote in his note. "It appears the daily deal business has run into a wall, with some blame going to the European recession." He has a $7 price target on shares.
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