Great Expectations for Groupon

 | Feb 27, 2013 | 12:15 PM EST
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The big earnings report today comes from Groupon (GRPN) after the bell. Analyst expectations are tempered. Remember that last November, the online discounter disappointed and the stock took a beating into the mid-$2s. But it's come a long way since then and is now near $6.

Groupon has had several disappointing quarters in a row, so many people have written the company off. The Groupon consensus estimate is for $0.03 per share. A whisper number is that Groupon will actually come in at breakeven. After the last report from Zynga (ZNGA) a few weeks ago, however, it's wise never be too quick to write a company off, even if it hasn't met expectations before.

A lot of positive news came out of Groupon's November earnings call, even though the stock tanked because of the headline miss. Management discussed how the fourth quarter was already off to a strong start. So this is Groupon's biggest quarter of the year.

Management also blamed most of the third quarter's problems on continued trouble in Europe. But they have put a new person in charge there and are now actively trying to replicate the North American playbook on the Continent. If Groupon can show an ability to stop the bleeding in Europe in this quarter, it will be huge.

The other key question to watch in this quarter's results will be Groupon Goods' performance. That segment grew like a weed for all of last quarter and that growth will probably continue in the fourth quarter. That should help the top line for Groupon, but critics complain that the margins are too low. If they are big enough in the quarter, however, they might still be a boost to the bottom line and that could end up helping Groupon push past the consensus estimate.

Besides Europe and Goods, investors will also be watching the marketing expense line closely. Groupon has been gradually turning these expenses down over the course of 2012. But it hasn't really hurt the company's top line yet. If they continue the trend, it should be another shot in the arm of profitability for the company.

I believe Groupon is set to bounce higher after a terrible post-IPO performance. Just like Zynga last month, Groupon could be poised to run closer to $10 with a good report today.

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