Shares of Groupon (GRPN) and Yelp (YELP) are sliding in morning trade after UBS downgraded both to Sell due to increased competition, noting that Internet giants Google (GOOG, GOOGL) and Facebook (FB) are increasing their efforts to capture local ad dollars. Amazon’s (AMZN) Prime Now continues to expand, reducing the benefit of a local marketplace, the firm added.

SELL AS COMPETITION HEATS UP: UBS analyst Eric Sheridan downgraded Groupon to Sell from Neutral as he believes there is still a long road ahead in strengthening the company’s positioning in the local ad and local eCommerce market. Meanwhile, larger Internet companies, predominantly Google and Facebook, are expanding in the local reviews market while Amazon’s same-day delivery service reduces the benefit of a local marketplace, Sheridan tells investors in a research note. The analyst maintains his $3.20 price target on Groupon’s shares. Sheridan also downgraded Yelp to Sell from Neutral, saying he is skeptical of the company’s turnaround. Sheridan believes Yelp, despite its efforts, has lagged in user growth, product innovation and necessary tech investments. The company will enter a period of slowing revenue growth and heightened margin pressures, driven by increased competition in its core business and share gains by larger digital ad companies, the analyst tells investors in a research note. Sheridan has a $17 price target on Yelp’s stock.

WHAT’S NOTABLE: Groupon’s shares rallied last month following the news that Alibaba (BABA) had taken a 5% stake in the company. Several media reports speculated about the prospect for a strategic partnership or even a possible takeover bid for Groupon by the Chinese Internet giant. The rally broke a long-term downtrend in the company’s stock.

PRICE ACTION: In morning trading, shares of Groupon tumbled over 8% to $4.20 and Yelp slipped more than 6% to $19.77.