Groupon Won't Ride Facebook Wave for Long

NEW YORK (TheStreet) --Although shares of Groupon(GRPN) popped to their highest level ever last week following buzz surrounding the Facebook IPO, don't expect the halo effect to last.

Unlike Zynga(ZNGA), which accounts for 12% of Facebook's $3.7 billion revenue, the social network's fortunes aren't intertwined with Groupon, which reports its first ever earnings after market close on Wednesday.

"They've completely decoupled from one another ... I don't see any ties," said Jeff Sica, chief investment officer of Morristown, NJ-based SICA Wealth Management, which has around $1 billion under management. "You can't trade on Facebook hype."

And while Groupon initially began as a so-called social commerce company --deals wouldn't kick off unless a minimum number of people signed up for them, causing users to spread the word through Facebook and Twitter -- the firm seems to be relying less on social media for new leads.

"Groupon started the same time that social media was picking up, which was around four years back, so it gets lumped in with the Facebooks of the world," said Sameet Sinha, an analyst with B. Riley & Co. "But I think of them more as a local advertising company now than anything else."

Even while Facebook continues to gain steam amid a potential valuation of $75 billion to $100 billion, a boost to shares of Groupon and other Internet companies like Pandora(P) and LinkedIn(LNKD) may be fleeting.

"If money flows into a sector it will lift good boats and bad boats, but you want to make sure you're in a good boat," said Karl Mills, chief investment strategist at San Francisco-based advisory firm Jurika, Mills & Keifer.

With or without Facebook, Groupon may be facing a rocky road.

The company's growth has slowed in the U.S., with 10% sequential revenue growth in the third quarter, compared with 33% in the second quarter and 72% in the first.

Merchants are also becoming increasingly wary about the nascent daily deal space, with about half of businesses who have issued a deal in the past saying they don't plan to do so again, according to a recent study by Susquehanna Financial Group and daily-deal aggregator Yipit.