Groupon Inc (GRPN), Pandora Media Inc (P), AOL, Inc. (AOL): Should You Take This Deal

The primary reasons behind this ‘miss’ and the lower expectations for the current quarter are the renewed marketing efforts by Groupon. The company is trying to raise merchant interest in its deals program. In the fourth quarter, the company started sharing more revenues with merchants to increase their interest in Groupon deals. According to CFO Jason Child, Groupon plans to continue its efforts to increase growth and merchant profitability. The company has forecasted that it is expecting revenues in the range of $560 to $610 million for the first quarter. This is way below street expectations of $650 million in revenues for 1Q2013.

Bottom Line

The quarterly results have raised more questions on the long term ability of Groupon to create shareholder wealth. It has not only missed expectations but also given weak guidance for the current quarter. Groupon is trying to reduce its take rate in order to increase merchant interest in its deals program. There was already a lot of criticism on the low margins of Groupon, and this cut will only increase these worries. These earnings have raised more questions and reduced investor confidence in the business model of Groupon. I recommend investors to stay away from Groupon due to falling margins and bad outlook for the current quarter.

The article Should You Take This Deal originally appeared on Fool.com and is written by Mohsin Saeed.

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