Why Groupon (GRPN) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Groupon Inc. (GRPN) are down -4.74% to $5.60 after it was reported that an Illinois sales tax law originally targeting Amazon.com (AMZN) could be brought back after it was struck down by the state's top court.

Now it could hurt Groupon. according to Crain's Chicago Business.

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Illinois had imposed a tax on out-of-state Internet retailers, called the 'Amazon tax,' which prompted some Illinois-based Internet marketers to move to Indiana and Wisconsin, according to a report in Crain's Chicago Business.

A new version of the bill could end up hurting Chicago-based daily deals site, Groupon, which has started offering coupons last year, the report said. 

"We rate GROUPON INC (GRPN) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 846.8% when compared to the same quarter one year ago, falling from -$3.99 million to -$37.80 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet & Catalog Retail industry and the overall market, GROUPON INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$20.72 million or 336.49% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of GROUPON INC has not done very well: it is down 19.17% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • GROUPON INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GROUPON INC reported poor results of -$0.14 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.11 versus -$0.14).
  • You can view the full analysis from the report here: GRPN Ratings Report

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