What’s Behind Groupon’s Slide?

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Groupon shares continue to plummet, falling below $8 for the first time Wednesday, and ending the day down 6.5 percent, bringing the stock down 62 percent year-to-date.

What happened?

ComScore sent its monthly report to its subscribers, revealing that June visitor traffic fell 15 percent from a year earlier. Groupon had 12.25 million unique visitors last month, down from 14.5 million in June 2011.

Groupon did not have a comment in response, but a representative of the company pointed out that June’s numbers were up from February, March, April and May. And the first quarter was Groupon’s best quarter yet. That would indicate that these trends may not impact Groupon’s bottom line.

Groupon faces the fundamental challenge that though it’s the largest in the business, there are low barriers to entry and it has a slew of competitors, including LivingSocial, which is backed by Amazon . And there has been plenty of media coverage of the fact that Groupon users and small businesses haven’t always been thrilled with the results of the deals.

All of this is putting short pressure on the stock—according to Capital IQ, short interest as a percent of float is 10.78 at Groupon, compared to 3.4 percent at Yahoo .

When Groupon reports earnings in August, it won't be just its revenue and profits that’ll be scrutinized. We can expect Wall Street to look very closely at the number of merchants who return to do business with Groupon again, and the number of repeat customers. Those may be the best indication of Groupon’s future potential.

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