Shares of Chicago-based Groupon Inc. are falling hard a day after its
disappointing third-quarter earnings.
The stock was tanking 27 percent, to $2.86, in late morning trading,
taking the shares below $3. Groupon went public a year ago at $20 and has
seen a steady drop in its stock price during its debut year, as investors
registered concerns over the daily deals company's business model and growth
rates. On Thursday after the market closed, Groupon posted a net loss of $3
million for the third quarter on $568.6 million in revenues. Analysts had
pegged third-quarter revenue at $590 million, according to Thomson Reuters
I/B/E/S.
Chief Executive Andrew Mason explained Thursday that the company is
moving aggressively to resolve problems such as dissatisfied merchants and a
subpar deal selection in Europe. He also touted Groupon's strategy to move
beyond e-mail, drawing customers to its website in search of discounts
whenever they're bored, hungry or looking for deals on certain categories of
products. The company is pushing Groupon Goods, a one-year-old category that
sells discounted physical products such as headphones or jewelry.
Investors and analysts, however, appeared unconvinced. In a Friday
report, William Blair analyst Ralph Schackart downgraded Groupon shares. The
investment firm cited sequential declines in third-party billings, which
represent the total amount Groupon collects from coupon sales where it acts as
the middleman. William Blair also noted pressure on Groupon's margins.
"While management is taking aggressive and positive strides to reposition
the deals and goods business for successful growth, given the reduced outlook
and series of our estimate reductions, we are lowering the rating to Market
Perform," the report said.
