As Groupon pitches its initial public offering plans to investors, analysts continue to give tepid views on the stock's prospects.  

In a revised S-1 filing Friday, the Chicago-based company said it will sell 30 million shares of stock priced between $16 and $18 a share. Through the IPO, the company hopes to raise $540 million (based on a $17 share price), which is significantly lower than the $1 billion or more the company was looking at early this year.

The company has planned on going public for months, but has pulled back due to stock market fluctuations. The tentative date for the IPO is now Nov. 4.

The company seeks a market valuation of $10.1 billion to $11.4 billion, well below the $25 billion the company was eyeing earlier this year. However, some still believe the company is overvalued. Investment research firm Morningstar has valued the company at approximately $5 billion.

Between 2009 and 2010, revenue for Groupon increased from $30 million to $700 million, with analysts expecting about $2 billion in revenue for 2011. Sucharita Mulpuru, an analyst with Forrester Research, conceded in a blog post this summer that the company has grown incredibly fast. However, she called much of that growth artificial. For instance, she pointed out that $265 million in revenue came from international acquisitions by the company. Also, she noted that the company launched more than 100 new markets in 2010.

I'll conjecture that in any market in America, you can sell $500,000 of half-off manicures and teeth whitening procedures in a year just by hanging a shingle, Mulpuru wrote. That gets us to another $50 million in revenue.

Although Mulpuru doesn't think the company will flop, she doesn't consider it the next Google or Amazon either.

There will be plenty more IPOs coming up with companies with greater profitability and higher barriers to entry (e.g. social networks with hundreds of millions of followers), Mulpuru continued. Those will be wiser investments. Give Groupon time to actually earn its valuation.

Despite fast growth, the company struggles to turn a profit. In the most recent quarter, Groupon posted a net loss of $10.6 million, according to the recent S-1 filing. A lot of the losses can be attributed to the amount of revenue allocated toward marketing.

We are currently spending more than just about any company ever on marketing, CEO and co-founder Andrew Mason wrote in an internal memo to Groupon employees in August. In Q2, we spend nearly 20 percent of our net revenue on marketing, while a typical company spends less than 5 percent.

Why do we spend so much? The simple answer is 'because it works,' Mason continued.

However, in anticipation of their IPO, the company has said they plan to pull back in marketing spending. Still, Morningstar believes that the company will not reach profitability until 2013.

CAN GROUPON CONTINUE ITS GROWTH?

Given that Groupon has entered so many markets, the company cannot continue growing at the rate of the last two years. Peter Krasilovsky, an analyst with media research firm BIA/Kelsey, told the International Business Times that the biggest growth potential for Groupon is through its Instant Deals program.

Groupon has been facing increasing competition from companies such as LivingSocial, which grew five times faster than Groupon in September, IBTimes reported last week. Furthermore, companies such as Google, Amazon and Gannett have jumped into the daily-deal fray as well.

But despite the competition, Groupon still commanded 49 percent of the market share for daily-deal sites, easily besting second-place LivingSocial, who took 21 percent of the share, according to Yipit, a site that aggregates daily deals.

Groupon has done very well working with local businesses, and they have begun to offer deals with larger companies, Krasilovsky said. The company has really built a strong brand and has gained a strong piece of the market share.

But the competition won't go away any time soon. Google, especially, has the power to eat into Groupon's market share in the future, Krasilovsky noted. Google already has lots of marketing data about consumers on file through their search engine business, which could make it easier for them to tailor deals to specific individuals.

Also, people have to print out their Groupons before using them, which Krasilovsky said can be a hassle. In the future, Google Offers may link up with Google Wallet, which allows people to send payments through their mobile phone. This could also give Google an advantage in the daily deals market.

BIA/Kelsey reported last month that revenue in the U.S. from online discounts will top $4.2 billion by 2015, an increase from previous forecasts of 3.9 billion. However, the research from the firm showed that growth will level off beyond 2015 due to saturation in the market.

Analysts note that, eventually, consumers may experience deal fatigue.

Increasing e-mail offers may de-sensitize consumers to daily deals, ultimately lowering the conversion of e-mail subscribers to end customers, Morningstar analyst Rick Summer wrote in a report.

The report pointed out that people may routinely ignore deals sent from unknown merchants, forcing companies to withdraw from the daily-deal partnerships.

Krasilovsky pointed out that in order to prevent fatigue, companies such as Groupon will need to find creative ways to turn everyday deals into lifelong customers for merchants.

Write to Samuel Weigley at s.weigley@ibtimes.com.