Groupon shares continue to slide

The stock hits an all-time low with earnings just around the corner.

By Benzinga Jul 12, 2012 11:03AM

By Brett Callwood

 

The shares of e-commerce marketplace Groupon (GRPN) on Wednesday dropped to the lowest levels since going public in November. They are dropping another 5.5% in Thursday morning trading.

 

According to CNBC, trend-tracking site ComScore reported a 15% decline in traffic in June compared to the previous year. In the same month, Groupon had 12.25 million visitors, down 2.25 million from June last year.

 

On Wednesday, Groupon shares dropped 6.5%, closing at $7.77, well below the IPO price of $20 per share. According to DealBook, that closing price values Groupon at a little over $5 billion.

 

Back in May, Groupon had reported earnings far exceeding expectations, and the company was showing signs of growth.

 

CEO Andrew Mason said at the time that the company is using technology to better target deals at specific customers, resulting in better purchase rates and higher spending from Groupon's 37 million customers. Statistics suggest that deals within a five mile radius of a customer has a five times higher chance of resulting in a sale. Even in the Internet age, people seem to prefer to buy an item from a local seller. Of course, when the deal is for a restaurant or a massage, this makes total sense.

 

Analysts are concerned, however, that this "targeted" approach requires more deals on the Groupon system, which in turn will require more salesperson on staff. Mason doesn't see a problem with that, saying, "I think we'll see that increase. We'll be adding more front-line sales force."

 

However, these latest numbers have to be seen as a setback. The company is pointing out that June's numbers were up from February, March, April and May, but that fact has done little to appease the analysts.

 

As the Chicago Tribune points out, Citi analyst Mark Mahaney cut the price target to $19 from $22 on Tuesday, saying "European exposure in particular is an issue."

 

Investors have long been suspicious of Groupon, and it will be interesting to see how Wall Street reacts to the earnings when they are reported in August.

 

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