On Friday, there were rumors rooting from Bloomberg’s reports that Google is planning on buying struggling Groupon Inc(NASDAQ:GRPN), whose shares have fallen 80% ever since the company had gone public in November of last year. This rumor had resulted in one-day shooting up of shares by 23%. The rally clearly was short-lived.
Shares of the online deals company tumbled down after an analyst rubbished the rumors of last week. Evercore Partners analyst Ken Sena said that there is no basis of such a claim. His rating and price target on Groupon are ‘Underweight’ and $3 respectively.
Sena believes that Google could not be possibly interested in a struggling company like Groupon that is deteriorating each day. The search giant possesses a lot of cash. On the other hand, Groupon’s stock is down nearly 80% from what it had gone public at $20 per share last year.
Another interesting point to note here is that acquiring Groupon would require lesser money than what Google had offered earlier when it was still private.
Sena believes that the core business model of Groupon is going down at a rate of 20% clip, quarterly. He feels that the new businesses of Groupon, for example, Groupon Goods, do not look promising. He said that it is a struggle to sculpt sustainable income and free cash flow growth from the new selling effort from Groupon.
Lately, Groupon’s shares have fallen 8.3% to $4.29. The stock has lost 80% of its worth in 2012.
Although Sena has rated it a Sell, he feels that Groupon can make matters better by offering coupons online and act as an authentic e-commerce player by taking advantage of on its customer base. Groupon has been breaking down its billings of orders in the third quarter. Hence, there are signs of efforts.
Sena feels that in a year, the company has increased to nearly nothing. He believes that the online deals company is on the brink of offering a retail experience this holiday season that influences its active user base of 40 million people.