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Analysts Downgrade Battered Groupon as Shares Swoon

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The fallout from a disappointing earnings report put new pressure on Groupon on Thursday, with the daily deal website hit by a rash of downgrades from Wall Street analysts.

A day after the company reported lighter-than-expected profits in the fourth quarter, Wells Fargo, Bank of America, and Raymond James all revised downward their targets for Groupon's shares.

The reports helped accelerate a swoon in the company's shares, which were down by more than 20 percent in late morning trading. (Click here for the latest after-hours quote.)

The stock's current level is a far cry from its 2011 initial public offering price, when the stock popped above $26 in its debut — far above the expected range of $16 to 20. Since last year, Groupon's shares have shed nearly 70 percent of their value.

IPO Gainers and Losers

Ticker Social Media IPOs Price IPO Filing Price 1st Day of Trade % Gain/Loss Since IPO Market Cap
LNKD LinkedIn 168.55 45 5/19/2011 274.6% 18.38 bil
YELP Yelp 21.86 15 3/2/2012 45.7% 1.39 bil
FB Facebook 26.87 38 5/18/2012 -29.3% 64 bil
GRPN Groupon Inc 5.98 20 11/4/2011 -70.1% 3.92 bil
ZNGA Zynga 3.52 10 12/16/2011 -64.8% 2.76 bil
Source: CNBC Analytics

In assessing prospects for Groupon's stock, analysts were sober to the point of depression. Wells Fargo lamented "the company's recent change in strategy" that has made Groupon less of a technology purveyor and more of a retailer.

"We liked the original Groupon business model of providing a syndicated commerce platform for merchants," the bank said, as it downgraded the company to market perform and cut its 2013 estimates.

The daily deal site posted a share loss of one cent per share, compared with a loss of 2 cents a year ago. Analysts had expected the company to post a profit of 3 cents a share. Meanwhile, it said it expects first-quarter revenue to be between $560 million and $610 million. Analysts had expected $650 million, according to a consensus estimate from Thomson Reuters.

"Despite double-digit customer growth, with gross profit declining year over year, Groupon has arguably the weakest fundamentals in our eCommerce coverage sector," said Bank of America. The firm downgraded Groupon to "underperform," and lowered its price target to $4.20 a share from $5.25 a share.

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