When Groupon reports earnings Wednesday after the bell, it isn't just under pressure to grow revenue and generate profits. The pressure is on for Groupon to show that its efforts to build new businesses are working.
CEO Andrew Mason has said he wants Groupon to provide the "operating system" for small businesses, which includes a mobile payments app. We'll see if those new tools — and relatively new businesses like its Goods product sales — are taking off.
Groupon's shares are down more than 70 percent over the past 12 months, but they've been on the upswing so far this year, boosted just last week by an upgrade by Piper Jaffray on the company's international growth potential.
Wall Street analysts expect the daily deals company to report earnings of three cents per share, compared to a loss of two cents per share a year ago. Revenue is projected to grow 26 percent to $638. This is on the low end of the company's outlook — with its last earnings announcement Groupon projected operating income between zero and $20 million, saying revenue is expected to grow between 27 percent and 37 percent.
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Stern Agee analyst Arvind Bhatia, who recently upgraded the stock to "Buy," issued a note saying "we believe many of the risks are well known and priced in and we see a few early signs of a turnaround." Bhatia expects fourth quarter revenue to re-accelerate from the third quarter, thanks to a typical seasonal boost in the holiday season, as well as growth in the Direct-to-consumer business, i.e. Groupon Goods.
Bhatia hopes to see the International business show progress to profitability. He also expects Groupon Goods to show significant growth — it's needed to compensate for the fact that revenue from daily deals declined 16 percent from the second to the third quarter.
We'll see if Mason can stem those declines. Another key factor to watch: gross margins and marketing costs — Groupon needs to manage the cost of luring in customers and merchants.
—By CNBC's Julia Boorstin; Follow her on Twitter: @JBoorstin