Groupon (NASDAQ:GRPN) will announce its earnings for the first quarter of 2012 on May 14. Its stock has been thrashed by the market following a slew of scandals, accounting errors, SEC probes and shareholder lawsuits. The situation has reached at point where Andrew Mason, Groupon’s CEO, decided to release a letter ahead of earnings to convince (and plead) to the world that despite everything Groupon still remains a great business. In this letter he outlined his long term vision for it, aiming to make Groupon “the operating system for local commerce.”
This will be a crucial earnings release for Groupon and may be a sign of things to come in 2012. While Groupon has shown impressive revenue growth in the last couple of years, its operating expenses have continued to mount. The increasing competition in the space means that Groupon cannot continue to maintain its high take rates, which could lead to competitive pressures weighing on its revenues. The increased competition could also force it to ramp up its marketing expenses to maintain its growth rate, which would splash its bottom line with even more red ink.
All eyes on Groupon’s new offerings
While Groupon is still primarily a daily deals site, it is now focusing on offering a complete range of services. It has already rolled out a number of tools and services targeted at local businesses, like Groupon Now, Groupon Scheduler and Groupon Rewards, and is expected to roll out a complete portfolio of marketing and other services eventually.
In this earnings call, besides tracking the traditional metrics for its core businesses, and keeping an eye on its expenses, we will be looking primarily at Groupon’s overall long-term strategy, and its new initiatives, which should drive growth for its daily deals offering going forward.
We currently have a $14 Trefis price estimate for Groupon, which stands nearly 35% above its market price, which is hovering near its all time low. Daily deals account for a major portion of its overall value. It competes primarily with LivingSocial backed by Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) Offers, Yelp (NYSE:YELP) and countless clones, but is looking to expand its offerings in other categories to diversify its revenue streams and drive its core daily deals business.