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Groupon stock drops nearly 30 pct., hits all-time low

Groupfile photo. AP

Groupon file photo. AP

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Updated: November 9, 2012 4:44PM



Groupon shares tanked nearly 30 percent to a new low Friday, a day after the Chicago-based daily deals site reported an earnings loss, a miss of analysts’ revenue forecasts, a first-ever overseas loss and continued reinventions to try to find its footing.

The stock price ended the day Friday at a new all-time low of $2.76, the first time it had fallen below $3.

The earnings news, which came out after the market closed Thursday, had sent the stock price down 16 percent in after-hours trading, putting Groupon’s share price 83.5 percent below its initial public offering price and set its market capitalization at about $2.5 billion, or 58 percent below the $6 billion that Google reportedly offered in a buyout in late 2010. Its lowest closing price of $3.68 occurred Nov. 1. The company went public Nov. 4, 2011, at $20 a share.

The stock was down 28.6 percent at $2.80 in morning trading Friday.

The company also announced Thursday it had laid off 80 salespeople as it seeks to lower the costs of winning new customers by replacing people with software tools.

Among the third-quarter misses:

♦ Operating cash flow plunged 35 percent to $42.1 million versus $64.4 million a year ago.

♦ Groupon’s $568.6 million in revenues and $25.4 million in operating income missed analysts’ targets of $591 million and $26 million, respectively. Groupon had predicted in August operating income of $580 million to $620 million. The company makes money on Groupons by emailing customers discounts to restaurants, events, nail salons and other venues, and splits the revenue with its merchant partners.

♦ Growth rates kept slowing, standing at 32 percent in the latest quarter versus 45 percent and 89 percent in the previous two quarters.

♦ European results were hit by the euro zone debt crisis and missteps that left merchants and customers disappointed.

“It was a weak report with revenue well below my and consensus expectations,” said Edward Woo, analyst with Ascendiant Capital Markets. “Disappointing gross billings down quarter over quarter again, and weak international results. . . . Same old story: too much competition and consumer fatigue both in the United States and internationally.”

CEO Andrew Mason told analysts that the company’s success in North America “demonstrates the power and potential of our (business) model.”

Among the points Groupon emphasized:

♦ Total revenues increased 32 percent from a year ago; adjusted earnings of 3 cents a share met analysts’ targets; profitability posted a gain versus a year ago’s loss, and “active customer” count jumped 37 percent from a year ago, to 39.5 million, while marketing costs to obtain those customers dropped 58 percent.

♦ Groupon Goods, in which Groupon owns inventory and sells products ranging from designer sunglasses to big-screen TVs, has become a popular destination and now accounts for $1.5 billion in global billings.

♦ Groupon is predicting fourth-quarter revenues of $625 million to $675 million, up 27 to 37 percent from the year-ago quarter.

Mason told investors that Groupon will “go beyond the inbox” and become a new type of company — what he called “the world’s first e-commerce marketplace offering deals on demand.”

Rather than wait for an email, Groupon customers in Chicago and New York may now access whatever they want when they want it, Mason said.

“We are becoming a marketplace with massive selection” where users can find a cleaning service, a place to get an oil change on the drive home or a site to locate a good Mexican restaurant when you’re visiting your parents in Pittsburgh,” he said. The company uses a “bank” of deals to generate the massive volume, he said.



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