The daily deal is done.
Shares of Groupon yesterday plunged a stunning 30 percent to a new low after the company’s latest quarterly results showed its core coupon business is already in decline.
The Chicago-based firm recorded $424 million from daily deal sales, down from $430 million in the same quarter a year ago and $500 million in the previous quarter.
It marked the first decline for its main business since Groupon sold shares to the public in a much-hyped initial public offering that valued it at nearly $13 billion.
The stock, which sold shares at $20 a pop, closed at $2.76 yesterday, giving it a market cap of $1.8 billion.
That’s quite a comedown for what was once touted as the fastest-growing company to reach a billion in revenue.
Google considered paying up to $6 billion for Groupon, wowed by its growth trajectory.
In the year before Groupon went public, the firm tripled its deals revenue.
With its business contracting, Groupon is also firing employees and announced 80 layoffs this week. It ended the third quarter with 11,800 employees, down from 12,800 employees in the second quarter.
Groupon, run by CEO Andrew Mason, makes most of its money by offering discounts to customers for use at businesses such as restaurants and salons. It splits the revenue with merchants.
Analyst Ken Sena with Evercore Partners set a target price of $2. Sena forecast that next year gross deals revenue, which includes the money Groupon splits with its merchants, will hit $3.9 billion, down from his previous estimate of $5.4 billion.
Groupon’s cash is another concern: It has $1.2 billion on its balance sheet, but half is earmarked for merchants and other expenses, “suggesting less cash valuation support than it would seem,” Sena wrote to clients.
Last quarter, Groupon managed to keep revenue from contracting dramatically because of the growth in its lower-margin direct-to-consumer retail business, Groupon Goods.