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Groupon Earnings Beat Forecast, but Revenue Is Light

Groupon
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Groupon

Groupon shares tumbled after the daily deal site's revenue fell short of estimates even as earnings beat Wall Street forecasts.

Groupon shares fell to a life-time low of $6.05 in after-hours trading. The company's stock has tanked since going public last November. (Click here to get the latest quotes for Groupon.)

Groupon, like many other companies, blamed Europe for its shortfall but with the stock down as much as 20 percent after-hours, investors were more focused on the company's slowing growth.

The company posted second-quarter earnings excluding items of 8 cents per share on revenue of $568million.

For the year-prior quarter, Groupon lost 23 cents per share on revenue of $392.6 million.

Net income was $28.4 million, or 4 cents per share, which includes a charge of $25.4 million for stock-based compensation and acquisition-related expenses.

Earlier this year, Groupon forecast second-quarter revenue of $550 million to $590 million.

"Revenue was at the lower end of where they guided," said Herman Leung, an analyst at Susquehanna Financial Group.

Groupon Chief Financial Officer Jason Child said Europe's weak economy and currency fluctuations dented results. He also said Groupon is working to improve its performance in that region.

Analysts had expected the company to report earnings excluding items of 3 cents a share on $573 million in revenue, according to a consensus estimate from Thomson Reuters.

The company forecast third-quarter revenue in the range of $580 million to $620 million. Analysts had predicted revenue of $604 million for the current quarter.

This quarter, Groupon changed the way it accounted for revenue. Consolidated revenue presentation now includes third-party revenue, which is related to sales for which Groupon acts as an agent for the merchant, as well as direct revenue.

If Groupon accounts for revenue that it only acts as an agent for, it’s probably only getting a percentage of that revenue. So there might be some questions about whether this accounting measure is falsely inflating overall revenues.

In its previous earnings report, the company beat analysts' forecasts but after the company filed its first-quarter report with the Securities and Exchange Commission, some analysts began to worry that the revenue beat was driven by Groupon's accounting for its growing Goods business.

The company has faced a series of accounting problems since its debut on the Nasdaq Stock Exchange. In March it revised its fourth-quarter results and admitted to a "material weakness" in its financial statements.

— CNBC's Julia Boorstin contributed to this report.


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