UPDATE: Citigroup Downgrades Groupon to Neutral On Slowing Core Business

Citigroup reduced its rating on Groupon

from Buy to Neutral, both high risk, and reduced its price target from $19 to $9. Citigroup noted the following as thesis changers, "1) Gross Billings growth decelerated sharply – from 103% Y/Y in Q1 to 47% ex-FX in Q2, while declining Q/Q for the first time ever -- despite North American personalization improvements and the strong growth in Groupon Goods. Euro Macro issues were a drag, but Daily Deal maturation has to be a factor. 2) Active Customers came in light vs. our est (38.0MM vs 39.4MM) and grew only 3% Q/Q. Again, Daily Deal maturation likely a factor. 3) The Q3 outlook for Margin Contraction – after 3 quarters of Expansion -- suggests the need to reinvest for new growth." Groupon closed at $7.55 on Monday.