Monday, September 17, 2012

Concern over Merchants Leads to Sharp Drop in Groupon Inc (NASDAQ:GRPN) Shares

Shares of Groupon Inc (NASDAQ:GRPN) declined sharply by about 10% on Monday on the Nasdaq, due to issues regarding merchant demand for the daily deals of the company. Raymond James analysts, led by Aaron Kessler released a report that comprised a survey including more than 100 merchants of Groupon on Monday, which clearly showed that they have various apprehensions in working with the organization.

The survey revealed that 16% of the merchants were "very satisfied” with championing Groupon promotions and 37% rated it “satisfactory”. However, the portion of “unsatisfied" or "very unsatisfied," amounted to a third of the group and 39 have stated that they might not promote another Groupon deal over the next 2 years.

Groupon, which specializes in daily deals, went public last year. Shares have come down to around three-quarters of their value in comparison to their value a year back when it became public. Accounting issues have been giving constant trouble, but some analysts and investors are of the opinion that the demand for daily deals is slowly reducing.

How Should Investors Trade GRPN Now? Find Out Here

Peter Krasilovsky, vice president and program director, BIA/Kelsey, which tracks local advertising and commerce, said that though 2012 has been a year of substantial growth for the online deals market, the time of maturity might be approaching soon. The deals have become “too available” to customers, which is why the market might be standing on the brink of saturation.

Groupon was put on Evercore Partners’ "conviction sell" list on Monday by analyst Ken Sena. He has a price target of $3 and has given an "underweight" rating to the stock. He feels Groupon should revise marketing strategies and devote more time in implementing them in order to come out of the saturation stage.

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