Groupon Plunges: What Wall Street's Thinking

Updated from 11:36 a.m. to include information from Sterne Agee analyst.

NEW YORK (TheStreet) -- Groupon (GRPN) shares plunged after the online goods company reported first-quarter earnings guidance that missed Wall Street estimates, causing some concern that the company is going in the wrong direction.

For the first-quarter, Chicago-based Groupon expects to lose between 2 cents and 4 cents a share, generating revenue between $710 million and $760 million. Analysts surveyed by Thomson Reuters were looking for the company to earn 6 cents per share on $681.2 million in revenue for the quarter.

Shares were down 20.6% to $8.16 in mid-Friday trade.

The company has been transitioning away from its previous business model, third-party sales, to generate more revenue from Groupon Direct, putting it in competition with the likes of Amazon (AMZN), eBay (EBAY) and others. Groupon Direct has significantly lower gross margins than the third-party business, but revenue has slowed significantly for that unit in the past few quarters.

For the fourth-quarter, Groupon earned 4 cents a share, beating analysts' estimates of 2 cents a share. The online deal company recorded revenue of $768 million for the quarter, beating analyst expectations of $718 million from those surveyed by Thomson Reuters.

GRPN ChartGRPN data by YCharts

Wall Street analysts tried to put a good face on the quarter, but the guidance concerned them. Here's what a few of them had to say.

UBS analyst Eric Sheridan (Neutral, $11 PT)

"Groupon guided revenue for Q1 2014 to a range of $710mm-$760mm (vs. our current estimate of $691mm and Street estimate of $669mm). Adjusted EBITDA (no longer emphasizing CSOI) is expected to be between $20mm-40mm (vs. our current estimate of $99.8mm and Street estimate of $97.1mm). Ticket Monster & ideeli are expected to contribute ~$50mm in Q1 revenue, but have a ~$20mm negative impact on Adjusted EBITDA (integration and investment behind these businesses). Additionally, Groupon plans to make ~$25mm in incremental investments (marketing & growth) in Q1 2014."

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