Shares of Chicago-based Groupon Inc. are falling hard a day after its disappointing third-quarter earnings.
The stock was tanking 27 percent, to $2.86, in late morning trading, taking the shares below $3. Groupon went public a year ago at $20 and has seen a steady drop in its stock price during its debut year, as investors registered concerns over the daily deals company's business model and growth rates. On Thursday after the market closed, Groupon posted a net loss of $3 million for the third quarter on $568.6 million in revenues. Analysts had pegged third-quarter revenue at $590 million, according to Thomson Reuters I/B/E/S.
Chief Executive Andrew Mason explained Thursday that the company is moving aggressively to resolve problems such as dissatisfied merchants and a subpar deal selection in Europe. He also touted Groupon's strategy to move beyond e-mail, drawing customers to its website in search of discounts whenever they're bored, hungry or looking for deals on certain categories of products. The company is pushing Groupon Goods, a one-year-old category that sells discounted physical products such as headphones or jewelry.
Investors and analysts, however, appeared unconvinced. In a Friday report, William Blair analyst Ralph Schackart downgraded Groupon shares. The investment firm cited sequential declines in third-party billings, which represent the total amount Groupon collects from coupon sales where it acts as the middleman. William Blair also noted pressure on Groupon's margins.
"While management is taking aggressive and positive strides to reposition the deals and goods business for successful growth, given the reduced outlook and series of our estimate reductions, we are lowering the rating to Market Perform," the report said.
wawong@tribune.com | Twitter @VelocityWong
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Groupon shares fall below $3
