Groupon Inc (NASDAQ:GRPN) stock has been down
downgraded by Barclays Capital to Underweight from Overweight. The brokerage
has also cut its price target on the stock citing slowing down in its daily
deals business.
The shares of GRPN gapped down and made another
record low of $4.34, but late morning the stock bounced back to as high as
$4.78 – 10% recovery. However, the stock once again retreated and was recently
down 2.40% to $4.54.
"The sale of products or "Groupon
Goods", which practically didn't exist two quarters ago and represented an
immaterial amount of first-quarter sales, represented the vast majority of incremental
sales growth in the second quarter," Barclays analyst Mark May said.
A continuation of this trend could hurt Groupon's
margin profile, he added.
Groupon Goods was launched in the third quarter of
2011, but it is low margin business compared to the daily deals that it offers,
that is its core activity. The daily discounts that it offers to online
customers are a big attraction as these discounts are offered on restaurants,
spas and salons. The revenue is split between Groupon and the business.
Can
GRPN Rebound? Find Out Here
Under Groupon Goods the company buys products in
bulk at a discount and sells them to customers at higher prices.
The economic recession especially in the Eurozone
has had an adverse impact on the company. With Internet giants such as Google
and Amazon also getting into the business competition for Groupon is set to
intensify.
Barclay's May added that slowing customer growth
could increase Groupon's marketing costs, and slashed his price target on the
company's stock to $4 from $15.
Reports about certain large investors selling their
holdings in the company after its IPO in November 2011, has also triggered a
wave of selling in the stock, which plumbed new lows on Tuesday.
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