Market Overview

Groupon Shares Slide to New Low

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E-commerce marketplace Groupon (NASDAQ: GRPN) saw shares drop to the lowest levels on Wednesday since going public in November.

According to CNBC, trend tracking site ComScore reported a 15 percent decline in traffic in June compared to the previous year. In the same month, Groupon had 12.25 million visitors, down 2.25 million from June last year.

On Wednesday, Groupon shares dropped 6.5 percent, closing at $7.77 after trading as low as $7.72 earlier in the day, well below the IPO price of $20 per share. According to Dealbook, that closing price values Groupon at a little over $5 billion.

Back in May, Benzinga reported that Groupon had reported earnings far exceeding expectations, and that the company was showing signs of growing up.

CEO Andrew Mason said at the time that the company is using technology to better target deals at specific customers, resulting in better purchase rates and higher spending from Groupon's 37 million customers. Statistics suggest that deals within a 5 mile radius of a customer has a five times higher chance of resulting in a sale. Even in the internet age, people seem to prefer to buy an item from a local seller. Of course, when the deal relates to something like a restaurant or a massage, this makes total sense.

Analysts are concerned, however, that this "targeted" approach requires more deals to pick from on the Groupon system, which in turn will require more salesperson on staff. Mason doesn't see a problem with that, saying "I think we'll see that increase. We'll be adding more front-line sales force."

However, these latest numbers have to be seen as a setback. The company is pointing out that June's numbers were up from February, March, April and May, but that fact has done little to appease the analysts.

As the Chicago Tribune points out, Citi analyst Mark Mahaney cut the price target to $19 from $22 on Tuesday, saying "European exposure in particular is an issue."

Investors have long been suspicious of Groupon, and it will be interesting to see how Wall Street reacts to the earnings when they are reported in August.

On Thursday, Groupon traded at about $7.70, down roughly 6.5 percent.

Follow me @BCallwood.

Latest Ratings for GRPN

DateFirmActionFromTo
Oct 2020Morgan StanleyMaintainsEqual-Weight
Aug 2020UBSMaintainsBuy
Aug 2020Credit SuisseMaintainsNeutral

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