Groupon Shares Plummet — Has It Hit a Wall?

Groupon shares were under heavy pressure Friday — at one point hitting an all-time low — after the daily deals company reported another disappointing earnings quarter.

Shares of Chicago-based Groupon fell 23.5% to $3 just after the start of trading. Earlier in the session, shares dropped as low as $2.95. Additionally, the percentage decline puts Groupon on track for the second-worst single-day drop in its short public history. According to FactSet data, the steepest decline in a single session was a 27% plunge on Aug. 14.

The stock has plunged 85% during its time on the market as investors have grown increasingly worried about the vitality of the company's business model.

Related: Web 2.0 Bust? Groupon's Early Investors Flee

Groupon generated $568.6 million in revenue last quarter, up 32% year-over-year, but falling short of the average analyst expectation of $591 million. It closed the third quarter with $25.4 million in operating income and posted a net loss of $2.98 million. Its daily deals business, which makes up 75% of the company's total revenue, equaled $424 million last quarter.

Evercore analyst Ken Sena lowered his target rating on Groupon stock from $3 a share to $2 a share after Thursday's dismal report. He also reduced his 2013 EBITDA estimate for Groupon from $260 million to $176 million, partly because of slower growth from the daily deals service.

Groupon's troubles last quarter could be blamed on Europe. France, Germany and Spain presented the biggest challenges to Groupon's international business, and gross billings abroad declined 12% year-over-year.

"Our solid performance in North America was offset by continued challenges in Europe," Groupon CEO Andrew Mason said in a statement.

The Daily Ticker's Henry Blodget says Groupon's third quarter was a "colossal disaster" but argues that the company continues to produce cash. It has transformed itself into an "email-based Amazon," which means the company "is booking 100% of revenue" in most of the deals it sells, he notes. But Groupon's growth cannot entirely depend on the daily deals business, Blodget argues.

"There's still a lot of questions about this daily deal model in the U.S.," he says. "The core daily deals business [in the U.S.] is now shrinking."

Related: Groupon's and Mobile Payments: Hail Mary or Savvy Strategy?

Groupon said it ended the third quarter with 39.5 million active customers, up 37% year-over-year. Groupon has more than 200 million subscribers around the world.

Meanwhile, the company is predicting fourth quarter revenue of $625 million to $675 million versus the current FactSet consensus estimate of $643.5 million.

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