Groupon's Impending Death Is Greatly Exaggerated

NEW YORK ( TheStreet) -- Much has been made about the problems that have plagued Groupon ( GRPN), which reports second-quarter earnings after the stock closes today.

Growth expectations have fallen sharply, thanks, in part, to a slowing global economy.

Groupon was able to deliver better-than-expected first-quarter earnings, driven by strong international growth. Still, Hudson Square's Dan Ernst expects that to have changed in the second quarter.

Ernst says sluggish economic growth in the U.S. and the debt crisis in Europe hurt Groupon's earnings. He also noted a rising dollar as a disadvantage. As a result, he reduced his earnings estimates for the rest of 2012 and 2013. He rates Groupon shares "buy," but cut his price target to $12 from $19.

International revenue doubled in the first quarter, as the brand resonated with consumers across the globe. However, U.S. growth may be slowing based on recent trends.

Raymond James analyst Aaron Kessler analyzed Google search trends and noted that worldwide searches for 'Groupon' have declined sharply year over year. Searches rose 21% in the second quarter, compared with 65% in the first quarter. He also noted that U.S. searches ticked down, slowing from 22% in the first quarter to 15% in the second. Kessler also noted that Yipit, a daily deal aggregator, showed Groupon billings fell 3% sequentially through May in the second quarter. He rates the shares "market perform."

Analysts polled by Thomson Reuters expect the the Chicago-based daily deals company to post earnings of 3 cents per share on $573.13 million in revenue.

Not all is lost for Groupon, which competes with Living Social, Amazon ( AMZN) and Google ( GOOG).

JPMorgan analyst Doug Anmuth says Groupon "is well-positioned to take share of the total leisure, recreation and food-service markets," which total $5.3 trillion in sales globally and $1.4 trillion in the U.S., he says.

Anmuth notes that as subscriber growth slows, profitability will move substantially higher over the next two years. Still, he's concerned about a weakening global economy. Anmuth rates the shares "neutral" with a $22 price target.

While Groupon has had its share of issues, it doesn't appear the company is going away anytime soon. Mark Twain may have said it best. "The reports of my death are greatly exaggerated."

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-- Written by Chris Ciaccia in New York

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