Is Groupon Stock Overpriced, or a Deal?: StockTwits

NEW YORK (TheStreet) -- Groupon  (GRPN) needs to spend too much money to make money. That was the verdict on StockTwits.com after the group discount site posted a smaller-than-expected loss on better-than-anticipated revenues, but fell short of expectations for second-quarter earnings.

$GRPN Missed on guidance estimates

? Alex K (@AKEB) May. 6 at 04:03 PM

Groupon management warned late Tuesday that the company intends to spend more on long-term expansion in the second quarter, cutting into earnings. Management guided to earnings per share of $0 to 2 cents, excluding some items. That fell short of the 3 cents analysts expected, according to consensus estimates published on Yahoo! Finance.

Groupon's revenue guidance of between $725 million and $775 million also failed to impress. The midpoint of that range, $740 million, missed analyst expectations of $754 million by a significant margin. The stock dropped 9% in after hours trading. Tuesday's close was at $6.72.

Groupon $GRPN drops 6%. Sales rise, but so do its losses

? Grok Trade (@GrokTrade) May. 6 at 09:13 PM

Earnings weren't all bad, however. In fact, the current quarter was pretty good, judging from Wall Street consensus estimates. The company reported an EPS loss of 1 cent, excluding non-recurring items such as acquisition-related costs and stock based compensation. That bested Wall Street's call for a 3 cent loss. Revenue of $757.6 million also topped estimates.

Groupon also raised its full year earnings outlook. The company now believes earnings will "exceed $300 million" this year. Last quarter management said full year earnings would be "slightly above" 2013's $286.7 million.

"We're on track with our plans in 2014 to invest in the growth of local, improve our goods margins, and drive profitability in our International operations," said Groupon CEO Eric Lefkofsky in a statement. "As a result, we have further confidence in our results for the back half of the year, and have increased our full year outlook."

Some investors said Groupon's results were bullish enough to bet on the stock rising Wednesday when more people are around to trade.

$GRPN No volume AH to be anything significant.

? Mike (@mikerock1973) May. 6 at 07:19 PM

@AHM16 Ya earnnings where not bad at all and guidance wasnt all bad. I think i buy some jan 15 $8.00 calls tomorrow.

? Mike (@mikerock1973) May. 6 at 07:25 PM

Bullish investors also blamed the after hours selloff on nervousness about new technology companies spurred by the widespread selloff in the social networking sector Tuesday. Once investors have a chance to regroup, the bulls argued that more people would see Groupon's value.

The stock trades at a lower earnings multiples than competing coupon site Coupons.com  (COUP), bulls argued. Groupon trades at roughly 25 times 2015 expected earnings. Coupons.com trades at 55.5 times expected 2015 earnings. RetailMeNot  (SALE) trades at a slight discount to Groupon -- 22 times 2015 earnings.

Bulls presented the case that, given Groupon's projected earnings trajectory and the price-to-earnings ratios of competitors, Groupon shares are worth more than $6.30.

$GRPN Just working out next 5 yr projections , if i use 1/2 PE of that $SALE the stock price will be $10 , $14 , $17 , $20 , $25 (FY 2018)

? rk23 (@rk23) May. 6 at 07:27 PM

$GRPN Assuming there is 3% GM improvement and 5% Opex improvement which seems to be easily achievelable with the investment thier are doing.

? rk23 (@rk23) May. 6 at 07:28 PM

But that case didn't sway the crowd Tuesday night. Sentiment on the stock remained 51% bearish, according to StockTwits analytics.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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