Groupon Inc. (GRPN) a Disappointment One Year after Bullish Sentiments from Analysts

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Groupon Inc. (NASDAQ:GRPN) has been an underperformer in the market over the past year, in contrast to positive sentiments echoed by analysts, after it posted better than expected results for the second quarter of 2013 at the back of the appointment of Eric Lefkofsky as its new CEO. The second-quarter results for last year were impressive according to Aaron Kessler, Raymond James SVP Equity Research analyst, as the company was enjoying a turnaround on its local business as well as shifting focus to its international business which at the time showed huge growth potential.

Groupon

“[…] They have shown some progress the last two to three-quarters here, and I think they are on the right track so why disrupt that now. I think they have the right pieces in place; they are starting to turn around the business. We’ve seen a turnaround in the U.S business in the last couple of quarters. I think international is the next to come, but I think they definitely are making the right steps at this point,” said Mr. Kessler in an interview on CNBC.

The tides have changed over the past year as the company continues to struggle with its transition from daily deal emails to e-commerce. At the time of the announcement of the second quarter results last year, the company’s stock was 80% up year-to-date, trading at an impressive $10.90 mark. Fast forward, Groupon has not maintained the growth momentum, consequently plummeting in the market and is trading at the $5.96 mark.

As of the second-quarter last year, Groupon Inc. (NASDAQ:GRPN) was enjoying success at the back of moving its business from the email model into ‘deal-banks’ as well as mobile platforms for carrying out transactions. The change was positive for the company, but the growth in the space looks to have cooled off. Increased competition from the likes of Amazon.com, Inc. (NASDAQ:AMZN) has already prompted the company’s CEO to initiate thousands of discounts as a way of attracting customers.

Groupon Inc. (NASDAQ:GRPN) has also been adding mobile and online features as a way of beefing up its transaction deals, although customers have been slow to embrace its new set of changes.

“[…] The main thing is they are moving away from the email model, emails are now less than 40% of the transactions in the site; moving more towards the mobile as well as Deal-bank. Deal-bank is really the pure model, consumers going to the Groupon Website. Maybe you find a Groupon Coupon through a search but less likely to just be finding it through email, I think that a positive change for the model” said Mr. Kessler.

Slow progress has been the main challenge for the Groupon Inc. (NASDAQ:GRPN), highlighted by its sales for the second quarter coming in at $751.6 million against consensus estimates of $762 million. Slow growth also looks set to continue after the company cut its full year guidance to $270 million from an earlier guidance of $300 million.

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