Boston, MA 07/03/2014 (wallstreetpr) – Groupon Inc (NASDAQ:GRPN) is a daily deals company that has many wars to fight, and it has to win all to survive. From market saturation to intense competition, the company is clearly fighting for its life.
The stock is down nearly 45 percent since the beginning of 2014, and that has been a cause for concern among investors. However, it is better to understand why the stock is down by such a significant margin and what lies ahead for it.
Shrinking Profit Margin
Groupon Inc (NASDAQ:GRPN) is not short of sales strategies to boost its top line. As a matter of fact, the company has been increasing its sales in North America and the rest of the world where it has operations. For example, the company noted 26 percent increase in 1Q2014 sales to generate a total of $757.6 million. That was supported by 27 percent growth in North America, 26 percent growth in Europe, Middle East and Africa region and 23 percent increase in the rest of the world as compared to the same quarter a year earlier.
However, even as revenue grows, profit margins have remained depressed, and that makes it difficult for the company to quickly exit loss-making operation.
The company suffered 1Q loss of $37.8 million.
Amazon Threat
Groupon Inc (NASDAQ:GRPN) still feels the heat of taking on industry giants such as Amazon.com Inc (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). In addition to established competitors, Groupon also faces growing competition from newcomers because online deals business is viewed as a lucrative investment.
The bottom line at Groupon has also suffered as the company has been in a transition phase where it seeks to pull users to its platform instead of pushing deals to them through emails. The company has also been seeking to enrich its offerings as it makes the service suitable for local and personalized deals.
The silver lining to the dark cloud that has engulfed Groupon Inc (NASDAQ:GRPN) is that the company is quickly gaining customer traction and increased focus on efficiency should deliver better bottom line results in the future.
