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‘Clearly a Lot of Concern’ About Groupon: Analyst

Jane Burnett, Special for CNBC.com
Thursday, 16 Aug 2012 | 11:03 AM ET
Groupon
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Groupon

With Grouponshares hitting new lows this week, two analysts raised concerns about the future trading success of the coupon company.

Herman Leung, senior analyst at Susquehanna Financial Group, told CNBC’s“Squawk on the Street” Tuesday that “there is a clearly a lot of concern on Groupon out there.” In the same broadcast, Aaron Kessler, senior analyst at Raymond James, also agreed that Groupon had “troubling metrics.”

“European macro headwinds” are hindering Groupon’s progress, Leung said, noting that in its earnings report “one of the biggest things that stood out to us was profit decline, down one percent sequentially, was a pretty big red flag in our book.”

Leung also talked about Groupon’s “changing” business model. “U.S. merchants are making more money than European merchants are, and they’re thinking about changing that model,” he said. “Now, changing that model will probably have some impact on the company’s cash flow and investment dollars going forward.”

Groupon: A Deal or Disaster?
Aaron Kessler, Raymond James analyst, and Herman Leung, Susquehanna Financial Group analyst, break down the company's second quarter numbers, and discuss what the company needs to do increase revenues and improve margins.

Kessler of Raymond James voiced concerns about the company’s mobile strategy. “I think some of these mobile, as well as other initiatives, should be driving a little faster growth, which we have not seen yet,” he said.

Kessler added: “The big concern for us in the quarter is if you strip out the direct business, the core dealer deals business was down about seven percent sequentially from the first quarter to the second quarter, and for a company that happened in hypergrowth mode this is a big concern to see that slowdown already.”

—By Jane Burnett, Special to CNBC.com

Additional News: Are Small Businesses Punishing Groupon?

Additional Views: Wall Street Revises Views on Groupon

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Disclosures:

Herman Leung does not own Groupon stock. SFG is a market maker in the securities of Groupon. Aaron Kessler does not own Groupon stock.

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