So you want to be a billionaire huh? Well of course you do, who wouldn’t? For some people the recipe sounded so simple. Come up with a great idea for a website, build it out, go public and party happily ever after. But the very reason you wound up becoming so successful in such a short period of time may be the same reason for your downfall. With a website, the barrier to entry is so low that it’s easy for anyone to step in and take your cheese. It looks like that may be the story of today’s Bear of the Day, Groupon (GRPN).
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Groupon operates a shopping website which offers good and services at a discount. It’s a great way for stores, restaurants and other companies to introduce their product or service to a new audience and help spread the word about their company. Who doesn’t love getting in on a $20 hour long massage or half-price appetizers at the new local hang out? The problem though is that nothing is stopping other companies from doing the same thing Groupon does. Massdrop, LivingSocial and Saveology are three examples of competitors that have sprouted up to take market share.
Laying off 1,100 employees along with bearish analyst estimate revisions have put pressure on Groupon’s stock price. The bearish attitude has pushed down the Zacks Consensus Estimate from 4 cents for next year down to a six cents per share loss for the company. That, coupled with last quarter’s penny a share miss have Groupon stock trading all the way down at $3.64.
Shares have been tumbling all year but the big move occurred when shares broke down through the bottom end of support at $7 in early May. From there shares have spiraled out of control, hitting a 52-week low just above $3 on the September dip. Shares are currently hanging on to a thread at $3.64.
Investors looking for other stocks within the same broad industry of Internet Commerce should look at Zacks Rank #1 (Strong Buy) JD.COM (JD) or Zacks Rank #2 (Buy) Expedia (EXPE).
David Bartosiak is the Momentum Stock Strategist with Zacks, editor of the Momentum Trader and Home Run Investor, and host of “Trending Stocks”
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JD.COM INC-ADR (JD): Free Stock Analysis Report
GROUPON INC (GRPN): Free Stock Analysis Report
EXPEDIA INC (EXPE): Free Stock Analysis Report
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