Benchmark Company Positive On Groupon Despite Plunge

Shares of recent IPO Groupon

have plunged this week after opening Monday's session above $26.00. On Wednesday, the stock is trading at $16.94 after its third straight day of double-digit percentage declines. Groupon is now trading below its $20.00 IPO price, and given the magnitude of the sell-off, investors are nervous. Benchmark Co. put out a report on Wednesday reiterating its Buy rating on GRPN and $32.00 price target. Benchmark analyst Frederick Moran wrote "Groupon has seen its shares tumble over the last 2 trading days to below its $20 per share IPO price. We are not surprised to see volatility in Groupon given it is highly controversial, somewhat unproven, early in its development cycle and has a subjective valuation due to a lack of cash flow or earnings." Moran added that stock market sentiment will likely play a substantial role in short-term price swings in the stock. Benchmark also theorizes on some of the factors that could be driving GRPN lower this week. These include renewed fears of an economic slowdown in Europe, where Groupon derives a significant amount of its revenue, competition from rival Living Social, concerns over eCommerce holiday sales, and increased short-selling in GRPN now that the cost of borrowing shares has declined. Despite these potential headwinds, Benchmark Co. remains positive on the company's future. The report argues that "Groupon has pioneered an Internet commerce operating system for local businesses and forged a dominant global position in the rapidly emerging new Internet segment of daily deals and marketing of local commerce. Groupon could experience exponential growth and potentially high profit creation." Benchmark's $32.00 price target for GRPN shares is based on 8x revenue, which compares to other highly valued stocks such as Baidu

and LinkedIn

, which trade at 12x and 9x revenue, respectively. In reiterating its optimistic outlook on Groupon, the report concludes that "barring a global recession we think Groupon will show impressive growth over the next few quarters that could drive the stock."