It seems the bottom has started to fall out of what was once a very promising concept. For Groupon, growth of 81% in North America is just not enough to sustain a model standing on feeble fundamentals as evident by an almost 50% drop in free cash flow -- falling from almost $50 million in Q2 to $26.1 in the recent quarter. Yet, some investors wish to look at the light at the end of the tunnel. That's all well and good, but investors have to realize that for the stock to work, the company must be able to show exactly how it will ever earn a profit despite having little to no competitive leverage. For these reason, it is hard to see how a bankruptcy filing is not in Groupon's future. What's more, the company's extremely low profit margin will make it a very unattractive acquisition candidate. Likewise, its business model would cost little to nothing to duplicate. These realities have caused analysts to rush to downgrade the stock, including William Blair who recently to lowered his rating on the stock to market perform.
Investors that want to look for the light at the end of the tunnel for Groupon should be careful that the glow they see is not that of an incoming train. This would be fitting considering that the company is already considered a train wreck of sorts. While I do understand investors' need to fall in love with a potential turnaround story with the hopes that one more bounce in the stock might be left, however that Groupon has lost 90% of its value over the past year suggests bigger fundamental concerns. As such, I would stay away from this stock -- at least not without surgical gloves. At the time of publication the author held no positions in any of the stocks mentioned.Follow @rsaintvilusThis article is commentary by an independent contributor, separate from TheStreet's regular news coverage.