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GroupOn bombs, blames Europe
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Old 16th August 2012, 08:42   #1
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Default GroupOn bombs, blames Europe

Groupon has seen its shares plummet by a quarter, blaming its disastrous performance on the European market.

Although the firm posted a 45 percent increase in revenues on a yearly basis in its Monday financials, shares soon nosedived by 26 percent as investors began to get jittery over GroupOn's core business.

Investors are getting spooked that the central business of retailing services through voucher codes is drying up. There is growth in secondary parts of the company's business selling products such as heart rate monitors, but these are regarded as less lucrative in terms of margins.

According to CEO Andrew Mason, this downturn is largely down to European markets. In a statement, Mason cited "challenges in Europe" for not providing stronger results. The Guardian writes that Mason also claimed Europe was creating a "significant drag" on its revenues.

But is Mason correct to blame Europe consumer on the downturn?

Could it be that economic armageddon-facing Europeans are finally sick of spending their last euros on laser hair removal or fish foot massages? Or maybe they are just sick of the cobblers peddled to them about actual voucher savings? Certainly daily deals sites have not exactly been covering themselves in glory of late.

Perhaps the truth is that, following a wave of publicity as it became regarded as the fastest growing company ever, GroupOn was just overvalued when it went public.

After going public in November last year at a price of $31.14, GroupOn's shares quickly dropped to $26.11 the following day. After the latest drop, these have now fallen to $5.53.

Groupon is still a relatively young company and is still in a good position according to some analysts. However, it appears that those investors expecting continued stellar growth have decided to jump ship.

If GroupOn can prove that it can keep its main business on a steady footing then it presumably will continue to be the dominant daily deals site, all without having to resort to beer-chugging, cat-on-head antics.
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