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A Glass Half Empty at Groupon, Half Full at Priceline

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For the daily deals company, a weak forecast cancels out strong results. Priceline, however, is given a pass.

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If you were watching the stock market after hours on Thursday, you got a clear message about the status on Wall Street of two big Internet stocks. Priceline (NASDAQ:PCLN) can get away with a cautious outlook. Groupon (NASDAQ:GRPN) most definitely cannot.

Both companies actually beat expectations in their latest quarterly results, announced after the close.

The non-darling of the two, Groupon, now trading at less than one-third of its mid-2011 initial public offering price, is still struggling to reimagine itself as something more than a site that promotes coupons for local businesses.

Based on its latest quarterly results, it's not doing badly on implementing that plan. It reported record merchant billings and a 20% increase in revenue.

But based on its outlook going forward, it has still got a long ways to go.

The company announced fourth-quarter earnings that beat expectations, helped by strong sales during the holiday season. Revenue rose 20.4%, to $768.4 million, topping analysts' average estimate of $718 million. The company's net loss was more than $81 million, virtually the same as a year before.

The company has earmarked $25 million to promote "Pull," its name for a new line of business selling local goods and services directly on the site, though not necessarily on the same day. That marketing expense was given as a reason for its forecast of a loss for the current quarter, ending March 31.

Groupon's business is now split three ways: daily local coupons marketed by email, Groupon Goods offering discounted items for sale on the site, and Pull. Visitors to the site enter a zip code to view a mix of local bargains and Groupon Goods.

That local orientation isn't just a legacy of Groupon's checkered past. It's the one thing that distinguishes it from its far bigger rivals in the bargain business.

It seems that even Groupon coupon customers haven't gotten the message, though. "The majority of our customers in North America still have no idea they can come to Groupon and search among our 80,000 deals in real time," said Chief Executive Eric Lefkofsky on a conference call with analysts after the earnings released.

Groupon shares spiked 18% in extended-hours trading before thudding back to earth with the announcement of its forecast for the current quarter. It closed down more than 11%, at $9.08.

Groupon seems to have found a sustainable business model at last, but it's not going to be an easy road ahead. It sees Amazon (NASDAQ:AMZN) as one of its competitors, and has even hired former Amazon Prime chief Robbie Schweitzer to head its operations division. The company is also up against online giant eBay Inc. (NASDAQ:EBAY).

It's no longer a Wall Street darling, but its latest quarter shows it's alive and kicking.

Priceline is on a whole different plane among Internet stocks. It reported 31% growth in fourth-quarter profit -- well above its competitors in the industry.

Its results were especially strong abroad -- up 41% internationally compared with 27% in the US. The company showed particularly strong bookings in Europe and emerging Asian nations, a trend Wall Street loves to see.

Like Groupon, Priceline was a little light on its projections for the current quarter: It sees profit of $6.35 to $6.85 per share with revenue growth of 15% to 25%. Analysts had hoped for $7.19 in profit per share with 27% revenue growth.

Nobody cared. In after-hours trading, Priceline rose 1.45%, to $1,301.59.

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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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