Please ensure Javascript is enabled for purposes of website accessibility

Why Groupon Shares Got Clobbered Today

By Evan Niu, CFA - Mar 9, 2016 at 2:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The former daily-deal maker gets hit with an analyst downgrade.

Image source: Groupon.

What: Shares of Groupon (GRPN 1.09%) got clobbered today, down by 10% as of 3:18 p.m. ET, after the company received an analyst downgrade.

So what: UBS dropped its rating on Groupon from neutral to sell, maintaining a $3.20 price target. Groupon faces intense competition in the local ad and local e-commerce markets, yet it lacks any meaningful competitive advantage over rivals. That's especially true when it comes to competing against much larger advertising companies that enjoy scale and are more innovative.

Now what: Shares jumped last month after Groupon reported better-than-expected earnings, but those higher prices may not be deserved, at least in UBS' opinion. The downgrade was very much related to recent price jumps, since current prices may not be warranted; some of the rally may have simply been short covering, and the company's valuation multiples now look stretched relative to UBS' earnings estimates.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Groupon, Inc. Stock Quote
Groupon, Inc.
$15.70 (1.09%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.