The investment banks that sold Groupon’s initial public offering have published their research reports on the stock, and their views of its future are mixed.
Credit Suisse, Goldman Sachs and Morgan Stanley managed Groupon’s IPO, when the Chicago-based daily deal company sold shares to the public for $20 each in early November. Usually banks that lead an IPO are more inclined to issue favorable ratings. But two of the three – Morgan Stanley and Credit Suisse – gave the stock lukewarm ratings.
Credit Suisse analysts rated Groupon "neutral." They said Groupon is tapping into a big market for local advertising and has the advantage of being number one. But the bank also cautioned that Groupon is “ a new company with a new business model in a competitive market.”
Behemoths like Google and Amazon now offer daily deals, as well as companies like Living Social that focus solely on the space.
Morgan Stanley’s analysts advised their clients to wait for the stock to fall before buying a lot of shares. They rated the stock "equal-weight." Morgan Stanley cautioned that competitors "may not be as motivated by near-term profitability," which means they can undercut Groupon's prices, forcing Groupon to either charge merchants less or risk losing business.
But Goldman Sachs rated the shares a “buy.” The bank said the advantages of scale outweigh the challenges Groupon faces.