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Groupon shares going for a massive discount

Shares of Groupon are getting crushed Tuesday after the website’s latest earnings report showed the company’s daily deal strategy is losing momentum.

Groupon’s stock price was lately down 25 percent at $5.68, having hit an all-time low.

Investors are concerned about signs of slowness in the company’s daily deals advertising business and weak international growth as Groupon deals with Europe’s economic woes.

“The daily deals business is clearly slowing down faster than the company thought,” Mark S. Mahaney, an Internet analyst at Citigroup Investment Research, told CNBC, adding that he doesn’t expect the company’s fundamental business operations to lift Groupon’s share price.

“Until you get some stabilization in the core business, that stock won’t go up,” he said.

Groupon grew briskly when it was a private company by linking local merchants with millions of daily deal seekers on its website. The company went public in early November and is one of a string of high-profile Internet companies -- including names such as Zynga and Facebook -- that have disappointed investors since their IPOs.

Since its market debut late last year, Groupon’s share price has tumbled 78 percent as its daily deals business has faced increasing competition from the likes of LivingSocial and SocialBuy.

Now Groupon is trying to expand into new businesses such as consumer product sales and merchant services -- areas that have much lower margins. The strategy puts Groupon in direct competition with Internet heavyweights such as and eBay.

“They clearly need to shore up the daily deals space before they go into these ancillary markets,” said Frank Sennett, author of “Groupon’s Biggest Deal Ever,” told CNBC.

The challenges Groupon is facing in Europe, which is struggling with slow economic growth, is a concern, he added.

“[Groupon] is supposed to be a good model in down times,” said Sennett.

“If Groupon can’t do well when people are looking for a bargain, that’s possibly a pretty big problem,” Sennett added.

Reuters contributed to this story.

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