Thursday, November 8, 2012

Groupon reports great revenue growth but now must deal with expectations and the revenge of analysts

Why companies want to go public is anybody's guess. OK, cashing out is one good reason. But when having to deal with analysts... well, it will give you ulcers.

Groupon, which had a chance to avoid all this by accepting an acquisition, is instead today dealing with the realities of being a public company – one this is generating gobs of money, but very little (or no) profit.

Today the daily deals company reported earnings for its second quarter and without considering expectations or outlook, the numbers look pretty good. Revenue grew 45 percent to $568.3 million (how many old media companies can claim that kind of growth), and the company turned a profit of $28.4 million versus a nasty loss of $107.4 million last year during the same quarter.

So, of course, the stock is currently down over 13 percent in after hours trading.

The reason, as you'd expect is that those numbers fell short of expectations. Groupon also said that next quarter should see the same kind of growth as this past one, but that wasn't good enough for investors.

The problem with Groupon remains the way it records its revenue and the very business model it is pursuing. Although the company today reportedly laid off up to 80 employees, it regularly is hiring due to the nature of its sales organization – a high pressure boiler room type of sales environment.

While there are those who continue to see Groupon as a high growth company, many others are pretty comfortable staying as far away from it as possible.