Shares of Groupon dropped sharply yesterday after the daily-deals company reported its first quarter-to-quarter decline in gross billings -- a sign, some analysts said, of online-deals fatigue.
By yesterday's close, shares had fallen to $5.51, down 27 percent from
the previous day and 70 percent from the initial public offering price last
November.
Groupon blamed Europe's weak economy and unfavorable currency-exchange
rates. But analysts said the online-deals craze no longer may be such a
bargain.
"It appears the daily-deal business has run into a wall," Clayton Moran,
a Benchmark analyst, wrote in a research note. "From what we can tell, the
bears were right."
Mark Mahaney, a Citi Research analyst, cut his price target on shares
from $19 to $9 and downgraded them from "buy" to "neutral."
"The (return on investment) and timing of necessary platform investments
won't be known for some time," he wrote in a research note yesterday. "And in
the meantime, the core Daily Deals business is sharply slowing."
When Groupon first appeared on the scene, it had the advantage of being
novel, said Edward Woo, a research analyst at Ascendiant Capital Markets.
"Everybody got excited," he said. "People liked the huge discounts."
But since then, similar websites -- including SocialBuy, GoogleOffers and
DealOn -- have sprung up, competing for the same users, Woo said, and Groupon,
which only a year ago was valued at $20 billion, today is worth between $3
billion and $4 billion.
