Here’s Why Groupon is Getting Slammed

Media advisor BIA/Kelsey expects consumer spending on online deals to hit $4.4 billion in 2013, and grow by about $400 million each year until 2016. Peter Krasilovsky, vice president and program director, said about the daily deal space: “After astronomical growth in 2012, the online deals marketplace is showing signs of maturity. There has been consolidation in the space, deal conversion rates may be suffering due to over-familiarity and the market by be near saturation. Still, market leaders continue to exhibit growth as market awareness and penetration spread.”

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This should come as great news for Groupon (NASDAQ:GRPN), but shares of the biggest daily-deals website tumbled nearly 10 percent on Monday. Evercore (NYSE:EVR) analyst Ken Sena has recommended selling shares, putting a $3 price estimate on the stock, which is currently trading around $4.90. “We see overall margin expansion and cash flow growth as tenuous,” he said. “Marketing expenses are on the rise given daily-deal fatigue.”

Groupon has attracted negative attention recently in the face of “material weakness in the design and operating effectiveness of our internal control over financial reporting.” Issues with accounting have prompted the company to appoint a new chief accounting officer, Brian Stevens, a former KPMG audit partner.

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