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Groupon Falls as Expenses Mount Amid Daily-Deal Fatigue

Groupon Inc. (GRPN), operator of the biggest daily-deals website, fell the most in more than a month on concern that marketing costs are rising amid waning consumer interest in online coupons.

Shares of Chicago-based Groupon dropped 9.9 percent to $4.75 at the close in New York, the biggest decline since Aug. 14. The stock has tumbled 77 percent this year.

As the discount service expands marketing efforts and gains a greater portion of revenue from Groupon Goods, an e-commerce site for marked-down products, “we see overall margin expansion and cash flow growth as tenuous,” said Ken Sena, an analyst at Evercore Partners Inc. (EVR), in a research report. He recommends selling shares and has a $3 price estimate.

“Marketing expenses are on the rise given daily-deal fatigue,” Sena wrote. Paul Taaffe, a spokesman for Groupon, declined to comment on the note.

The company makes money by selling discounts -- known as Groupons -- from businesses such as restaurants and nail salons. It then splits the revenue with the retailers. Last month, Groupon reported second-quarter revenue that missed estimates because of economic weakness in Europe.

Groupon Goods made up most of the company’s $65.4 million in direct revenue, which more than tripled from $19.2 million in the first quarter, the company said last month.

To contact the reporter on this story: Lisa Rapaport in New York at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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