Wells Fargo Downgrades Groupon, Inc. (GRPN) to Market Perform

February 28, 2013 7:21 AM EST
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Price: $3.47 +0.58%

Rating Summary:
    11 Buy, 20 Hold, 6 Sell

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    Up: 1 | Down: 2 | New: 3
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Wells Fargo downgraded Groupon, Inc. (NASDAQ: GRPN) from Outperform to Market Perform and lowers its valuation range to $5.00 to $6.00 from $6.00 to $7.00.

The firm comments, "Groupon reported Q4 results that fell slightly below expectations. More
concerning to us however, is the company’s recent change in strategy. We liked
the original Groupon business model of providing a syndicated commerce platform for merchants. Unfortunately, it now seems that the company is moving away from a technology platform for merchants and into a discount inventory overstock retailer. Gross billings came in ahead of estimates driven by product sales, but margins were significantly lower across the board as a result. In our view, the investment thesis for the business model has changed, and we believe that the turnaround in the International business is going to take longer than we had hoped. We understand that the company is experiencing some growing pains, and experimenting with different avenues of growth. However, we are not convinced that unloading overstock goods at very low margins is a good strategy. We believe that this diminishes the brand, and could drive the more profitable deals to other premium branded sites. More importantly, we think this puts Groupon on a collision course with Amazon."

The firm lowered FY2013 revenue of $2.5B and EPS of $0.20, down from $2.7B and EPS of $0.22.

For an analyst ratings summary and ratings history on Groupon, Inc. click here. For more ratings news on Groupon, Inc. click here.

Shares of Groupon, Inc. closed at $5.98 yesterday.

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