Sterne Agee has announced that their analyst has downgraded Groupon Inc (NASDAQ:GRPN) from buy to neutral, due to concerns over their slowing growth rate. They told Value Walk that they feel they are late in issuing this downgrade, considering the recent decline in share price. They further informed us that 2nd Q revenue will most likely come in at the lower end fo guidance, and their full year estimates fall below the general consensus.
In May, Sterne Agee upgraded Groupon Inc (NASDAQ:GRPN) from neutral to buy, due to the great 1st Q earnings report. This report showed revenue increase 6% above estimates, and gave the company a solid base to start the fiscal year. U.S. Revenue alone, was up 33%, and this provided a sense of security in the company’s ability to continue to earn.
Sterne lists two major causes for the decline of Groupon Inc (NASDAQ:GRPN) in this quarter. The first reason was macroeconomic conditions, especially in the European areas. The economic problems in Europe are no secret to any economist, and many companies in nearly every field have reported losses in the European market. The second reason was due to losing some of its market share to Living Social, who is Groupon’s most notable rival. Living Social showed their 2nd Q revenue to be up 25% sequentially.
Our source in Sterne tells us that the profits reported during the first quarter by Groupon were based on gross, rather than net, and could have indicated a strength which realy was not there. The estimate that the net revenue rate was closer to an actual 8% than 14%.
Sterne Agee’s analyst has lowered their estimates for 2012/2013 4%/10% respectively. The old estimates were for $2.4 billion and $3.0 billion in 2012 and 2013, respectively. The new numbers look like $2.3 billion, and $2.7 billion respectively. The old non-GAAP estimates were $0.19/$0.53, respectively, while the new estimates are $0.11 and $0.34, which is well below the average estimate of $0.66. The estimates for EPS fall in the $0.42 to $0.91 range.
Groupon has struggled of late, and Sterne’s downgrade is just one more in a list of poor marks for the company this quarter.