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Analyst cites Groupon’s staff turnover, new investments

Updated: October 15, 2012 4:15PM



An analyst Monday lowered his estimates for Groupon’s revenue based on the Chicago-based daily deal site’s staff turnover, increased investments in other companies and fierce competition and slowing sales in the daily-deal marketplace.

Edward Woo, senior research analyst at Ascendiant Capital Markets, said Groupon’s near-term earnings could be hurt by its investments in Breadcrumb, which provides checkout and management software for restaurants, and Savored, an online restaurant reservations provider, and its introduction of Groupon Payments, a payments system that offers to save merchants money on the “swipe” fees they pay on credit card charges.

Shares of Groupon fell 9 cents, or 1.7 percent, to close at $5.20 Monday. That’s down 74 percent from the initial public offering price last November.

Groupon will report third-quarter earnings on Nov. 8.

Groupon has said Breadcrumb could serve as a first step in its offering restaurant reservations, which would put it in competition with reservations leader OpenTable.

Woo also noted that Groupon has lost several executives in the past quarter, including Veit Dengler, senior vice president-international, and employs 2.6 percent fewer salespeople — 5,587 this quarter versus 5,735 in the previous quarter— as the stock price keeps dropping and employees look for opportunities elsewhere.

“Staff turnover may increase the possibility for near-term business disruptions,” he said.

He also noted that the daily deals industry as a whole had a 10 percent slowdown in sales in the third quarter compared with the second quarter of the year.

“Groupon is likely, as the leading daily deals company with 50 percent market share, to experience no or negative growth in its deals business in the third quarter,” Woo wrote in a note to investors.

Woo lowered his estimate of Groupon’s 2012 earnings-per-share results to 13 cents from 15 cents, and lowered his 2013 outlook to $2.7 billion from $2.74 billion. He has a “sell” on the stock, which he values at $3.50 a share.



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