CHICAGO, Oct. 30, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Groupon, Inc. (Nasdaq:GRPN-Free Report), Amazon.com Inc. (Nasdaq:AMZN-Free Report), Invensense Inc. (NYSE:INVN-Free Report) and Western Digital Corp. (Nasdaq:WDC-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday's Analyst Blog:
What Are the Chances Groupon Will Surprise in Q3?
One of the leading e-Commerce service providers, Groupon, Inc. (Nasdaq:GRPN-Free Report), is set to release the third-quarter 2014 earnings results on Oct 30.
In the last quarter, the company delivered a positive surprise of 50.00%. While the company has delivered positive earnings surprises in three of the last four quarters, the average beat ratio stands at -226.79%. Let's see how things are shaping up for this announcement.
Factors to Consider
We believe that growth in local billings in both North America and EMEA regions will boost Groupon's top-line growth in 2014. Management expects local billings to grow in North America in the second half of 2014, reaching a double-digit growth rate by the end of the year. Similarly, in EMEA, local billings are forecasted to increase steadily in the second half.
We believe that strong growth in mobile, new user additions, the Ticket Monster and Ideeli acquisitions, continuing investments in POS and payment technologies, focus on the pull marketplace and innovation in the push business through introduction of new technology will help Groupon to achieve billings growth in 2014 and beyond.
However, Groupon's business model makes it heavily dependent on daily deals, which is a major headwind. Since most of the offerings are consumer discretionary products, demand is heavily dependent on macroeconomic conditions.
The company's ongoing transition to the live pull marketplace has removed the sense of urgency associated with email-based push daily deals business. As redemptions are high and unused Groupons are low (revenues recognized upfront in daily deals, so an unused Groupon boosts the company's revenues), the transition is expected to negatively affect the top line in the near term.
Moreover, intensifying competition from players like Amazon.com Inc. (Nasdaq:AMZN-Free Report) remains a major headwind, which will hurt profitability. The company expects competition in e-Commerce generally, and group buying in particular, to continue to increase. Growing competition is expected to keep Groupon's pricing under tremendous pressure in the near term. Furthermore, it reduces the company's bargaining power with the merchants as they can move to other deal providers.
Earnings Whispers?
Our proven model does not conclusively show that Groupon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate for third-quarter loss per share stand at 4 cents.
Zacks Rank: Groupon carries a Zacks Rank #2 (Buy). However, when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are a couple of companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Invensense Inc., (NYSE:INVN-Free Report), with an Earnings ESP of +10.00% and a Zacks Rank #2.
Western Digital Corp. (Nasdaq:WDC-Free Report), with an Earnings ESP of +0.98% and a Zacks Rank #3 (Hold).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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