) plummeted 6.46% ($0.38) to close at $5.50 on Jun 2, 2014
following the reported revival of an Illinois sales tax law.
Earlier, Illinois had imposed a tax on out-of-state Internet
retailers, which was originally targeted at
).That is why it is often referred to as the "Amazon tax."
However, the Illinois Supreme Court had struck down the tax in Oct.
2013, citing a federal law that barred the imposition of taxes on
out-of-state retailers that had no physical presence in the
This federal law was passed in 2011 and it drove away many Internet
retailers from Illinois, thus leading to a decline in job
opportunities in the state.
Following the dismissal of the law, Illinois legislators have
modified the proposal in a manner that sales taxes can be imposed
on out-of-state retailers that issue promotional coupons and other
materials through mail, radio or television.
It is likely that this amended bill may adversely impact
Chicago-based daily deals site Groupon, which started offering
coupons in the state only last year.
Despite impressive revenue growth at the online coupon and deal
site, the company's shares have dropped a massive 54.0% in 2014
alone. The factor primarily responsible for the aforesaid
phenomenon has been the lack of profitability.
Groupon's policy of launching new products on a regular basis and
the growing popularity of its mobile app continues to attract
consumers. The company reported strong holiday season sales with
billings up 30.0% from the year-ago period.
Groupon noted that more than 50% of the transactions (55.0% of
North America) were carried out through mobile devices with its
offering of more than $100.0 million in Groupon Credits attracting
Groupon's latest acquisition of TicketMonster will help it to
strengthen its position in the mobile commerce market. At the same
time, it will provide significant traction to Groupon in the Korean
market, one of the fastest growing e-commerce markets in the world.
However, we believe that the market is becoming more competitive
due to growing interest of technology stalwarts such as
) and Amazon.
), which had recently launched a coupon business called Zavers, has
now decided to exit because of the lack of profitability. Moreover,
a volatile macroeconomic environment and continued investments to
expand its merchant base are expected to impact Groupon's near-term
Currently, Groupon has a Zacks Rank #3 (Hold).
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