Groupon Analyst Cheat Sheet
The long-awaited IPO of Chicago-based daily deals website Groupon (NASDAQ:GRPN) has finally arrived. The stock debuted on the Nasdaq Stock Market (NASDAQ:NDAQ) today with the symbol GRPN (NASDAQ:GRPN) and is already trading 38% above the company’s IPO price of $20 per share — above the $16 to $18 per share range set a few weeks ago.
Now that Groupon (NASDAQ:GRPN) is part of the publicly-traded arena, it’s time for analysts to give their two cents on the stock. Here’s three takes on Groupon:
Trefis has Groupon’s price at $12.87. By reviewing Groupon’s six divisions, 54.85 percent of its stock price comes from the North America Featured Deals division. Trefis broke down its forecast for the $12.87 price from five rationales:
Smaller priced items to boost profits for merchants; daily deals good for certain niches; competition from other players; strong backlog of orders; and, a strong growth in online spending.
Stock price: It’s extremely expensive. While BI believes Groupon (NASDAQ:GRPN) is a very attractive business, they foresee decelerating growth from hyper-growth to profitability. In the short-term, this will crush the stock in the short-term but really, who knows what will happen.
Red flags as seen by Henry Blodget, CEO and Editor-in-Chief of Business Insider:
- Groupon is NOT a Ponzi scheme.
- Groupon is almost profitable now, and it will likely be nicely profitable over the long haul
- Groupon’s revenue growth over the last few years has been remarkable, but…
- Groupon’s growth is decelerating rapidly as the company cuts marketing spending in a drive to become profitable.
- Groupon’s growth is also decelerating because 1) the company has picked the low-hanging fruit in many key markets, 2) competition is intensifying, and 3) the company’s product-mix is reducing the percentage of gross coupon sales that it keeps
- Groupon’s core business, local daily deals, actually shrank in the US in the third quarter, a startling and concerning trend
- Deceleration and product transitions usually clobber stock prices, and Groupon’s stock will likely continue to get clobbered until the transition is finished.
- Once Groupon’s growth rate stabilizes, I think it will eventually settle into a ~20% long-term growth rate
Barrons cited Benchmark’s Fred Moran to get some analyst’s thoughts on the IPO. He paints a different picture about third quarter growth with the following language:
The US Daily Deals market experienced some seasonal moderation in its billings growth rate over the summer with domestic Daily Deals falling by 7% m/m sequentially in July. But, demand re-accelerated with August up 9% in terms of both revenue and deal volume while September jumped 12%, according to Yipit. Groupon saw 6% sequential m/m billings growth in September to $143 million. Groupon’s US market share in September stood at 54% versus Living Social at 22%. Further evidence the of Daily Deals market re-acceleration in September came through Travelzoo’s (NASDAQ:TZOO) 3Q11 earnings report released last Thursday with its September billings up 36% over August. Daily Deals may experience a holiday season uptick if it gets used as a gift giving tool.
Additional Morgan nuggets included the following:
“Groupon’s dominant position in the rapidly emerging daily deals segment of local commerce could lead to exponential growth and a potentially highly profitable enterprise.”
“We expect a combination of more diversification of offerings, including travel and product deals, to combine with geographic expansion to drive total Groupon gross billings growth of 450% y/y in 2011 to $4.1 billion, leading to $1.6 billion of revenue,” writes Moran.
Good luck to all the Groupon (NASDAQ:GRPN) traders out there!
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