Another analyst lowers target for Groupon
BY SANDRA GUY Business Reporter email@example.com August 27, 2012 5:36PM
Updated: September 29, 2012 6:11AM
Groupon’s stock closed Monday at $4.41 a share, 78 percent below its $20 IPO price, but one analyst thinks it has a ways to go before hitting bottom.
Edward Woo of Ascendiant Capital pegged Groupon’s stock at $3.50 a share, down from his previous $5 target, and maintained his “sell” rating in a report issued Monday, citing the Chicago-based daily deal site’s staff cuts, continued deal slowdowns and financial opaqueness, its loss of two top sales executives in the past week and competitors’ use of partnerships to source and expand their deal offers, rather than the more costly step of hiring salespeople.
A Groupon spokeswoman had no comment.
Last week, Groupon lost Lee Brown, the head of its national sales, and Jayna Cooke, who put Groupon on the map with national partnerships with Gap and Nordstrom. Cooke is the new senior vice president of business development for startup EventUp, a website offering unique party venues and space such as castles and mansions, and backed by Groupon founding investors Eric Lefkofsky and Brad Keywell.
Groupon cut its U.S. sales staff by 2.6 percent, to 5,587 in the latest quarter from the previous quarter, Woo said in his note to investors.
Woo said “uncertainties” with Groupon have increased recently, leading to possibly more employees jumping ship as the stock price and the employees’ stock-option values decline.
Also, AmazonLocal’s use of Yellow Pages advertising firm YP.com to help source and expand its daily deals offerings “could significantly challenge” Groupon’s leadership in the deals industry, Woo said.
Such partnerships are less costly than hiring salespeople, a business model that Wall Street analysts have come to criticize for its expense.
In addition to YP.com, AmazonLocal has strategic relationships with LivingSocial and other partners, as well as a small sales team in some markets.
Other analysts have cited Groupon’s ability to generate cash — $330 million in the past year — to argue that Groupon could still be a good, and currently cheap, deal in the long run.
Shares of Groupon closed down 3 cents from Friday.