Groupon (NASDAQ:GRPN) shares fell to a new low on Friday after an analyst’s report raised fresh concerns about the daily deal company’s cash position because of slowing billings growth. The stock closed down 5 percent, at $4.75, after having dropped to a record low of $4.51 earlier in the day.
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Evercore Partners analyst Ken Sena cut Groupon stock to underweight from equalweight and set a $3 price target because of what he called “working capital concerns.” Sena said the company was adding expenses rather quickly, and despite its $1.2 billion in cash reserves, could be in trouble soon. “We see its future cash position as potentially tenuous,” Sena said in a note to clients.
The analyst said he expected tougher times for the daily deals business, leading to cash burn. “Should billings declines persist, we see a potential for cash burn as Groupon would find itself in a situation where it would be paying cash to merchants on a larger (prior) business scale relative to the cash it would be collecting,” he wrote.
Sena also expressed concerns about the company’s new focus on the low-margin e-retail service, Groupon Goods. “Until greater disclosure of Groupon’s ‘first-party’ Goods business…is made clear or until the correlation between billings performance and negative third-party checks proves inaccurate, caution in the name is needed,” Sena said.
The Chicago-based company has endured a tough week after reporting disappointing second-quarter earnings. Groupon went public in November at $20 a share, but the stock is now down 77 percent from the IPO price.
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