Author Topic: GRPN - Groupon  (Read 13918 times)

writser

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Re: GRPN - Groupon
« Reply #10 on: December 09, 2012, 09:48:59 AM »
My previous quote was referring to GMCR.

Regarding Groupon: as far as I know they haven't shown a profitable year so far so I would turn around your question into: "what can happen to make Groupon sustainable and live?". I have no clue: I don't see a strong moat, they don't make money and there are no barriers for competitors. On top of that they use(d) dubious accounting practices and there is no margin of safety in the balance sheet.

I have no strong expectations about the future either way (i.e. huge success or failure) so I would focus on historical results and from what I have seen so far this does not qualify as a 'value' investment for me. I'd rather buy ZYNGA if I want to speculate on growth: at least they have 3/4th of their market cap in cash and have shown that they can be profitable.

« Last Edit: December 09, 2012, 09:52:53 AM by writser »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.


valueInv

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Re: GRPN - Groupon
« Reply #11 on: December 09, 2012, 09:55:14 AM »
Was it a decent price because the stock doubled up in two months? Or was it decent value because the company was unreasonably valued? I'm not sure about the latter one. I'm also not sure about the integrity of management.


I think a better way to think of it is the market in the short term is a voting machine. The market HATES groupon and has already cased there ballot. Nothing is going to change that perception except sustainability. Everything is not sustainable. Until it eventually is or dies. So the question is what can happen to make groupon unsustainable and die? Please someone answer this and i can change my thesis.  The market is betting groupon wont be around in 2-3 years. I'm willing to take that bet based upon  my qualititave framework.

There's a guy called Rocky Agrawal who has written extensively on Groupon's business model flaws at Techcrunch. Check his articles out. He essentially predicted the situation Groupon is in right now.

Palantir

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Re: GRPN - Groupon
« Reply #12 on: December 09, 2012, 02:11:59 PM »
These guys are generating FCF and have 1B in cash......tasty....
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premfan

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Re: GRPN - Groupon
« Reply #13 on: February 15, 2013, 04:23:06 PM »
I love how Mr. Market in November was saying the business model is unsustainable and the company is going bankrupt when it was NO LTD. Its been a good spec so far ( the only spec in my portfolio).  It will be interesting to see if their European operations recover from the last quarter.  I love the service and its still by a mile the best way to get traffic in your business. 

Palantir

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Re: GRPN - Groupon
« Reply #14 on: February 16, 2013, 11:16:13 AM »
Dude this is undervalued. I need to revaluate my opinions.  I hope you bought this?
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premfan

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Re: GRPN - Groupon
« Reply #15 on: February 16, 2013, 11:57:57 AM »
Its a  8 percent position and currently classifed as a spec. I need more info to make this a long term investment. Its still too early in the game. Also its next to impossible to value. 

My mental checklist while making the investment:

1.)Whos my partner? = Tiger Global and the big three who owns 20 plus percent of the company

2.)Whats the cataylst ? =  Continued revenue growth and the google "put". Google reportly offered 6 billion to buy company when revenue was in the 1 billion range.

3.)I'm i uncomfortable making this purchase?= yes to some degree. The best investments are when you are uncomfortable making them.

4.)Short term risk of bankrupty?= No. Company has no LTD

5.)Wall street consenous= Extremely overly negative. Wall street HATES the Ceo. Wall street thinks the company is going bankrupt ( remember no LTD) and its unsustainable. One of the most hated companies in recent memory.

6.)How big is there market= Massive. E-commerce and daily deals.

7.) Is it cheap?= YES. when i made the purchase the key metrics were silly cheap.




Palantir

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Re: GRPN - Groupon
« Reply #16 on: February 16, 2013, 01:44:01 PM »
What is your understanding of potential barriers to entry? How well are they handling mobile biz v desktop?
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hellsten

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Re: GRPN - Groupon
« Reply #17 on: February 21, 2013, 02:46:28 AM »
What is your understanding of potential barriers to entry? How well are they handling mobile biz v desktop?

There's a Groupon clone in every city and country, but Groupon probably has some kind of minor moat.

Here's what happened to early investors in LivingSocial:
http://www.privco.com/livingsocial-receives-emergency-110m-cash-infusion-from-existing-investors-to-avoid-bankruptcy

Quote
Today's Participating Investors Effectively Now Own The Entire Company
Common Stock and Shares of Company's Employees Now WORTHLESS



IMO most social media startups and companies are/were basically scams at IPO (Zynga, Groupon, etc).

More on LivingSocial:
http://finance.fortune.cnn.com/2013/02/21/what-really-happened-at-livingsocial/
« Last Edit: February 21, 2013, 11:49:06 AM by hellsten »

premfan

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Re: GRPN - Groupon
« Reply #18 on: February 21, 2013, 07:21:45 AM »
Agreed it was silly to play 10x revenue for the tech IP0's. Living Social was just a copycat of groupon. They tried to scale up fast and it was working for a bit. The problem with daily deals is its extremely easy to start but challenging to scale. The reason the scaling is challenging is due to the number of small businesses that meet the standards to do a daily deal. Its not like the trend has been job creation via small businesses. Also its compounded  due to banks being tougher with there loan requirements. So its a supply problem ( variety of deals) not a demand problem.

So there is a fixed piece of the pie that livingsocial and groupon were attacking. Groupon is the innovator and brings in the most traffic due to there collective buying model. Living Social doesnt do the collective buying model. The collective buying model triggers impulse buying and creates a sense of comfort in there purchase and a lack of buyers remorse. So when you see 500 other people buying that item or getting that deal it creates social proof.

Also groupon is pivoting constantly and  is  not strictly a daily deals company anymore. I'm thinking the e-commerce business will account for most of the revenue this year. E-commerce is intrinsically a low margin business ( unless its vertically aligned) so its vice versa of the deals business.  Its much easier to scale and creates another service in the groupon platform.

What i like about groupon is the platform that they are creating. They keep pivoting and entering new markets while increasing there platform ( by having more services for the customer).  Finally it does appear groupon creates "float". The "float" created has allowed them to pivot into e-commerce. Not like insurance float but, non traditional float.  Its the subscripton float model where a customer buys upfront for a groupon. The merchant keeps half and groupon pockets the rest. For every groupon purchased its ala a subscription fee for that service. I dont know if they changed this but, they used to wait 3 months to pay the merchants. So they have 3 months to gain interest on other peoples money until they give the merchant there cut.

DCG

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Re: GRPN - Groupon
« Reply #19 on: February 27, 2013, 06:23:45 PM »
Down 25% after hours after posting a loss.