Daily deals site Groupon Inc(NASDAQ:GRPN) has again
come in for heavy selling and the stock is hitting new lows on Friday on heavy
volumes.
In late morning trades the stock was down 8.4 percent
at $4.58 with 22.77 million shares changing hands, compared to average daily
volumes of 11.94 million shares. It made another new record low of $4.51.
Incidentally both benchmark indices the Dow Jones
Industrial Average and the Nasdaq are marginally up on Friday so far.
The trigger for the sell-off of the shares seems to be
the downgrade by Evercore Partners who has put a Sell on the stock. Analyst Ken
Sena cut the shares to underweight from equal weight citing `working capital'
concerns.
Can GRPN Find
The Bottom Soon? Find Out Here
The stock has already lost about 77 percent from its
IPO debut last year at 420 a share.
The company seems to be struggling amidst a cash
crunch with expenses fast overtaking its cash inflows. The company has about
$1.2 billion of cash on its balance sheet but analysts feel that it would not
be enough to cover its expenditure.
“We see potential for future cash burn assuming
billings declines persist as the deteriorating impact of ‘changes in accounts
payable’ could be enough to offset growth in income earned,” said Sena,, in his
research report.
He downgraded the shares to underweight and cut the
price estimate to $3 from $6.50.
Groupon revenue model involves selling discounts from
businesses such as restaurants, salons and spas. The revenue i split between it
and the businesses.
Earlier this week Groupon reported weak second quarter
numbers that missed analyst estimates.
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