Groupon’s stock price since IPO in November 2011:
Groupon (GPRN), has been getting hammered by the stock market for almost two years. Once the “fastest growing company in history,” it has lost over 90% of its valuation since its IPO in November 2011. But Groupon has no long-term debt, is still growing, and has over $2 billion in annual revenue. So what caused Groupon’s beating, and is it time to invest in the company?
Groupon is suffering from what is commonly described as the “Facebook bug.” Its rapid growth and huge buzz created around its IPO shot up its value indiscriminately, but just like Facebook, Groupon did not have the revenues to back up its valuation. For both companies, they have seen tremendous losses in their valuation and stock price (Facebook down about 50%, Groupon at 90%).
Now, with their stock price decreasing, we should expect their revenues to be decreasing also – but they are not. Groupon’s revenue’s have been increasing each quarter since their IPO. Here are the numbers that matter the most (for stocks):
- Q3 2011: $430 million in revenue
- Q4 2011: $492 million in revenue
- Q1 2012: $559 million in revenue
- Q2 2012: $568 million in revenue
- Q3 2012: $569 million in revenue
Well, that’s not looking good. Although their revenue is increasing – it looks as if it is about to come to a halt. With competition now rampant, Groupon has not been able to make the extraordinary revenues anymore from its original business model, Daily Deals. But with $1.2 billion in cash and a current valuation of $1.74 billion, it can almost backup each share cash.
Groupon is walking a thin line, and if it goes one direction, it will disappear just as fast as it appeared, and in the other, it can be a great investment. Since Groupon is bleeding revenue and talent (at least eight senior executives have left the company since 2011), BusinessJad does not see Groupon rebounding.
BusinessJad advice to fix Groupon:
1. Refocus on email deals and scale back on mobile apps. With email deals, each deal was likely viewed more than on a mobile app. The mobile app provides let of an incentive to open as it could be tucked away on a user’s phone.
2. Use what you have to your advantage: subscribers. It’s estimated that Groupon has over 60 million subscribers. This is extremely valuable and allows Groupon to market new ideas and products to its entire base quite easily, so they need to use it, which they haven’t done recently!
3. With their massive user base, they can turn themselves into an Amazon or eBay, and be very successful. They have the brand recognition and infrastructure in place to do so. Go for it, Groupon.
The Crystal Ball is not always right, so heed the information and advice in this article at your own risk!