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File: Employees at Groupon pose in silhouette by the company logo in the lobby of the online coupon company's Chicago offices. Charles Rex Arbogast/AP/Press Association Images

Groupon shares plunge to lowest level yet

The online deals giant went public a year ago. It reported a loss yesterday of $3 million.

GROUPON SHARES PLUNGED to their lowest level since the online deals giant went public a year ago, as analysts offered a harsh response to a disappointing earnings report.

In morning trade, Groupon tumbled 28 per cent to $2.81 – down some 85 per cent from the public offering price in November 2011 of $20. Groupon reported a loss yesterday of $3 million in results that came up shy of most analyst forecasts for a small profit.

Revenue increased 32 per cent year-over-year to $568.6 million in the third quarter and was up 38 per cent in constant currency. But analysts said the company appeared to be stalling, and that moves into new products and international markets were hurting.

Daniel Ernst at Hudson Square Research downgraded Groupon, saying “we believe the aggressive push into direct sales creates operational risks, lower margins and the potential for merchant partner conflict.”

Sterne Agee’s Arvind Bhatia said that Groupon’s “international (segment) was particularly discouraging as it lost money in the quarter — a meaningful reversal after reaching profitability earlier in the year.”

“The company and the stock will likely remain in the ‘prove to me’ camp until trends reverse on a sustainable basis,” Bhatia said in a note to clients.

Citi analyst Neil Doshi said Groupon’s move into mobile commerce raised new questions. “And this management team doesn’t yet have an execution track record,” Doshi said.

In the meantime, the core daily deal business has almost slowed to a halt, and rapid mix-shift to direct revenue drastically changes the profitability profile of the model.
Until we see sustainable growth in core daily deal business coupled with an outlook for expanding core margins, we continue to pass on this deal.

Groupon shares were listed on the Nasdaq last November in a blockbuster public offering that raised a whopping $700 million and triggered fears that investors were overvaluing hot Internet startups.

The company, which rejected a $6 billion takeover offer from Google a year ago, has enjoyed phenomenal growth since its founding in 2008 but has been dogged by questions about its business model and accounting methods.

Groupon makes its money by selling members deals for discounts on activities, items, or services and then splitting the money with the businesses involved. It recently has expanded into direct sales.

Read: 3 in 5 consumers have signed up to an online discount site>

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    Mute Claire Murphy
    Favourite Claire Murphy
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    Nov 9th 2012, 6:01 PM

    Ooh a two night stay in a top hotel in Cavan for only 345 euro pps, mon to thur only! T&cs apply
    And people wonder why it’s such a crap site.

    226
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    Mute c.walsh
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    Nov 9th 2012, 6:44 PM

    In the middle of nowhere with nothing to do!! Or else the hotel doesn’t have anything available at all!

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    Mute Jack Stenson
    Favourite Jack Stenson
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    Nov 9th 2012, 8:20 PM

    I’ve gotten savage deals on a snow boarding holiday and a villa in Majorca. There’s a lot of crap but every now and then there’s pure gold on there

    77
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    Mute David Murphy
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    Nov 9th 2012, 6:28 PM

    The next groupon mail out will be deal on their own shares.

    138
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    Mute Begrudgy
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    Nov 9th 2012, 7:34 PM

    Rejected a 6 billion takeover deal. Ha ha ha ha ha ha ha ha. Serves them right the greedy pigs.

    77
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    Mute tony duggan
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    Nov 9th 2012, 6:50 PM

    I rang them once for advertising but their 50 % cut on overall profit is way too high, i’m not surprised they’re struggling .

    73
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    Mute Will Monaghan
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    Nov 9th 2012, 6:05 PM

    I’m not surprised !

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    Mute c.walsh
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    Nov 9th 2012, 6:43 PM

    Not surprised, i bought 3 things from the website and 2 of them were a waste of money! Makes my blood boil even thinking about it!

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    Mute George Haines
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    Nov 9th 2012, 7:42 PM

    dont touch them with a barge pole

    32
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    Mute Stephanie Meehan
    Favourite Stephanie Meehan
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    Nov 10th 2012, 2:50 AM

    Groupon was at the beginning, a great idea! Hotel/restaurant deals are fab, once you can download and print a voucher straight off you’re safe. But, I will never buy anything again from groupon that I can’t physically have immediately. I ordered a kids bean bag in September last year, expecting it for Christmas at least, I was still fighting for it end of January. I also ordered Christmas lights, they arrived January. Every day in December I called both Groupon and the bean bag company and had no joy, eventually after leaving my phone on loud speaker for 40 minutes I eventually got through to a girl in the UK, she had no record of my purchase and told me that Groupon where having great difficulty contacting the bean bag company. I’m not surprised their share prices have plummeted, with some decent management it’s a super idea. People are looking for good deals at the moment and there are great offers but I will never use Groupon again.

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    Mute Figo murphy
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    Nov 10th 2012, 8:48 AM

    Same thing happened to me twice Stephanie. Last time with a wine holder, I never received it. Groupon told me it was nothing to do with them, that I’d have to chase the other company. The other company had run out of stock, they refunded me half the money and told me I had to chase Groupon for the other half. Groupon told me they had sold the ‘voucher’ in good faith and there was nothing they could do. I have never used Groupon again. Poor way of doing business.

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    Mute Michael Skellig
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    Nov 9th 2012, 9:52 PM

    Groupon is full of crap deals nobody wants.

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    Mute jerry slattery
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    Nov 10th 2012, 12:13 AM

    Internet Bubble … fools gold

    14
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    Mute Tom Callaghan
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    Nov 10th 2012, 10:52 AM

    50% charge on all profit on a product/service that is already has its price reduced severely? Rejected massive takeover bid?? Idiots running the show, serves them right,

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    Mute Dave Meier
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    Nov 10th 2012, 12:30 PM

    The Groupon concept is built only on price without a thought for quality.
    People are happy saving a few quid but they still expect something that is worth the original (higher priced) value.
    The whole business fails to create customers who will buy deals very often. Instead they rely on attracting new people which means constant cost to acquire them.
    If they were strict about the type of offers and set certain standards to meet on behalf of their users then they would have much more repeat business and not be loosing money.

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    Mute Caroline Locke
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    Nov 10th 2012, 2:28 PM

    ….English?????????What was that about???????

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    Mute Michael
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    Nov 10th 2012, 7:01 AM

    Hmmm. I might buy that stock now, seems cheap

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    Mute Tony Skillington
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    Nov 10th 2012, 9:03 AM

    Buy it today and you might get a 50% discount…won’t see your shares until April though..

    9
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