Shares of embattled daily deal site, Groupon Inc. (NASDAQ: GRPN) nosedived on Tuesday after UBS analyst Eric Sheridan initiated the coverage on the stock with “sell” rating, setting a price target of $4.40 a share.
Sheridan cited fundamental weakness in the Company behind his pessimistic outlook on the stock.
“(Groupon) has a largely unproven business model, a wide ranging global business mix in transformation, and is undergoing a management change,” said Sheridan in a research note to clients.
Earlier in February, Groupon sacked its Chief Executive, Andrew Mason as the Company failed to improve its performance and reported a surprise loss.
The Chicago IL based Company posted a net loss of $81.1 million, or 12 cents a share, while analysts’ consensus estimate was for earnings of 3 cents a share.
Back then, the Company also provided downbeat forecast on the current quarter. The Company said it was expecting revenue to be in the range of $560 million to $610 million, which was below analysts’ forecast for $650 million.
Falling margins and increase in sales and marketing costs linked to company’s new Groupon Goods business and disappointing performance in international markets are weighing on financials.
The downgrade comes just after several other analysts gave mixed ratings on the stock. On February 28th, analysts at Jefferies Group said they were maintaining “hold” rating on the stock with a price target of $4.0 a share while analysts at Sterne Agee reiterated “buy” rating on the shares on the same day.
Currently, six equity research firms have “sell” rating on shares, sixteen firms have maintained “hold” rating while three firms keep “buy” rating on the stock. On average, the stock has “hold” rating and average price target of $5.85.
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