Groupon, Inc. GRPN is set to release first-quarter 2015 earnings results on May 5. Last quarter, the company delivered a positive earnings surprise of 200.00%. The company has delivered as average positive earnings surprise of 91.97% over the last four quarters. Let’s see how things are shaping up for the upcoming announcement.
Last quarter, Groupon reported solid results with significant improvements in both the top line and the bottom line. Rising e-Commerce spending on mobile devices, a profitable domestic market and an underpenetrated international market are among its primary growth drivers which, we believe, will aid the first quarter results as well.
The company’s business model that focuses on discounts and deals to drive sales is likely to attract many consumers, especially in the holiday seasons, in our view. Also, the company’s strategy of offering special deals prior to important events, like Thanksgiving, enhances its popularity. We expect these opportunities to continue to drive top-line growth.
Further, the convenience of online shopping has paved the way for e-tailers to enhance their experiences. Moreover, increased traction in the mobile business driven by the increasing adaptability of smartphones and tablets is another positive.
However, the company continues to face significant competition not only from giants like eBay EBAY and Amazon.com AMZN but also from small players like LiveDeal, which is a major near-term headwind. Growing competition is expected to keep Groupon’s pricing under tremendous pressure in the to-be-reported quarter. Furthermore, it reduces the company’s bargaining power with the merchants as they can move to other deal providers.
Earnings Whispers
Our proven model does not conclusively show that Groupon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 2 cents per share.
Zacks Rank: Groupon carries a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stock to Consider
Here is a stock that you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter:
Cogent Communications Holdings, Inc. CCOI has an Earnings ESP of +33.33% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment