Groupon Inc has never been the most well-regarded firm in web industry. From claims of poor accounting leading up to its IPO, to a slew of well-funded competitors traveling on its coat tails, the firm has faced a huge amount of criticism. Now it seems to be taking some of the critique on board. On November 3, Groupon said that it was dropping co-founder Eric Lefkofsky as CEO.
Groupon revealed its earnings for the three months through September on Tuesday afternoon. The numbers weren’t exactly good, and shares were selling for more than 20 percent below Tuesday’s closing price before the market opened on Wednesday morning. The firm dropped CEO, Chairman and guidance on Tuesday, and Wall Street isn’t happy.
Groupon drops everything
Mr. Lefkofsky will take up a job as the firm’s chairman of the board while current chairman Ted Leonsis will take up a role as independent director. Mr. Lefkofsky will be replaced as Groupon CEO by Rich Williams. He was the firm’s Chief Operating Officer up until yesterday afternoon.
The change at the top may not be what’s really getting to Groupon traders on Wednesday. The firm’s lower sales guidance for the fourth quarter, and its lower than forecast sales in the third quarter, were likely the most worrying and effective parts of the firm’s report.
Sales for the full year 2016 are now forecast at $2.75B-$3.05B, while Wall Street looked for $3.19B. Groupon said that it expects to bring in sales of $815M to $865M over the holiday quarter. Wall Street was looking for the firm to guide for sales of $956.83M, and the daily deals email marketer is being punished for the miss.
Groupon loses support
At time of writing shares in Groupon were selling for $2.94 in pre-market trading. That’s about 27 percent lower than the shares closed at on Tuesday, and the lowest that the firm’s stock has ever sold for. The reaction on Wall Street was supported on Wednesday morning by more than one research house.
Piper Jaffray lowered its price target on the firm from $7.50 to $2.50 and downgraded its outlook from Overweight to Neutral. Bank of America also lowered its target on shares, from $5 to $2.75, and dropped its rating on Groupon shares to Underperform.
Brean Capital stayed very hopeful on Groupon in relative terms. Despite noting the “severe pressure” on the firm in the wake of Tuesday’s earnings, Tom Forte, who authored the report for Brean, lowered his price target to $5, more than 40 percent above the price shares are on sale for this morning. His old target was $8.
Mr. Forte said that Rich Williams is the “right person” to lead the firm out of its current problems, and added that focus on Groupon Good should bring “higher margin,” “higher quality” sales to the firm. Traders are decidedly nervous, and in despair, over the changes that Groupon made on Tuesday. If Forte is right, there may be a rebound at some point in the coming days and weeks.