Shares of , the daily-deals Internet company, fell sharply on Tuesday as second-quarter revenue came in below expectations and investors focused on slower growth.
The plunge brought Groupon shares down about 25 percent, to $5.60, in afternoon trading. At that price, the stock is down more than 70 percent from its offering price when the company went public last November.
Andrew Mason, Groupon's chief executive, put a positive spin on his company's prospects. “It was a solid quarter,†he said in a conference call with Wall Street analysts, adding that the weak economy in Europe had affected Groupon's business there.
Groupon said its net income was $28.4 million, or 4 cents a share, as compared with a year-earlier net loss of $107.4 million. Revenue climbed 45 percent, to $568.3 million. The profit was slightly above the expectations of Wall Street analysts, but the revenue number fell short. Analysts had expected 3 cents a share and revenue of $573 million, according to a survey by Thomson Reuters.
Groupon also said revenue in the current quarter would be $580 million to $620 million, an increase of 35 to 44 percent from a year earlier, but just 2 to 9 percent higher than the second quarter.
Apart from the revenue forecast, investors were concerned about the way Groupon records the revenue it gets from its merchandise sales, known as Groupon Goods. Groupon records not just its share of the payments from buyers but the total amount paid.
In the conference call, Jason Child, Groupon's chief financial officer, said that if the company booked only its share of sales, it would give too much information to competitors about its business costs. If just Groupon's share was counted, he said, revenue growth in the second quarter would have been 30 percent, not 45 percent.
“If you strip out the Goods business, they were down 7 percent from the last quarter,†said Ken Sena, an analyst with Evercore Equities. “It shows there is a softness in the deals side,†which should be the more profitable part of Groupon's business, he said.
Groupon, based in Chicago, was an early leader in the business of offering discounts on things like restaurant meals and local tourism over the Internet, profiting as a middleman on the deals. It grew to $500 million in revenue in just three years, faster than eBay or Amazon, and now offers more than 1,000 deals each day in more than 48 countries.
Its fast rise has for months been in an equally stunning retreat, which began with concerns about Groupon's ability to lock in repeat transactions with merchants and consumers. With the after-hours trading Monday, Groupon's market capitalization of about $4 billion was $2 billion less than Google's buyout offer for the company in November 2010.
The collapse of the stock, along with similar performances by both Facebook and the online games company Zynga, has led to questions about whether these new fast-growing consumer Web businesses were overpromoted. Zynga, which closed Monday at $2.93, is down 69 percent from its initial offering last December. Facebook, which had its debut as a public stock last May at $38 a share, closed Monday at $21.60, down 43 percent from its offering.
While none of these companies have lived up to investors' highest hopes, Groupon's decline has many specifics. Some small businesses have said that they are not getting the expected repeat traffic from their Groupon offerings, giving them a net loss on the deals. Coupon buyers often fail to exercise their impulse purchases and become less inclined to purchase more.
Groupon has also faced increased competition from both Amazon.com and Google, which started its own deals business after it was rebuffed by Groupon. Both Amazon and Google are proficient in using lots of data and statistical projection to target offers.
Groupon has over the last several months hired executives from Dell, Sprint and Amazon to address its marketing problems, and has opened an office in Seattle, where Amazon is based. Those efforts are most likely too recent to have had much impact on the second-quarter performance.
Mr. Sena, the analyst, said the earnings indicated that Groupon was moving toward a greater dependence on selling discounted merchandise rather than the more profitable coupons. “I see a company making a change in its business out of necessity more than opportunity,†he said.
