Groupon Inc (GRPN): Is It Finally Time To Buy This ‘Perfect’ Business?

Take a moment to try to imagine the perfect business.

It wouldn’t have any of the worries or costs associated with inventory. The business would be able toprofit from any product or service in the world without actually having to spend the time and moneyrequired to operate the particular business. This business would create incredible value for consumers by providing the lowest prices available for whatever happens to strike a consumer’s fancy.

Groupon Inc (NASDAQ:GRPN)

In addition, it would create a win-win situation for other businesses by guiding a stream of customers to their front door. Its products and services would have close to zero cost, creating nearly pure profit from each sale. Finally, the company would use the Internet to reach a worldwide client base at minimal expense.

There is no need to imagine this perfect business. It actually exists.

This theoretically perfect company is the much maligned Groupon Inc (NASDAQ:GRPN).

Launching as the one of the most hyped IPOs in history, this daily-deals site has done nothing but smash the dreams of investors from its first days as a public company. Despite exponential growth from 400 clients in 2008 to a present 150 million, the company is down nearly 80% from its highs. Groupon Inc (NASDAQ:GRPN) is trading at around 27 times next year’s estimated earnings.

My purpose is not to rehash what happened or provide “woulda, shoulda, coulda” hindsight analysis of Groupon’s missteps. I’ll leave that to the pundits and armchair quarterbacks. Rather, I want to build a case that Groupon Inc (NASDAQ:GRPN) is a potentially profitable long-term investment.

Groupon Inc (NASDAQ:GRPN) has a market cap of over $5 billion, revenue of more than $2 billion with year-over-year quarterly revenue growth of 7.5%. I am fond of following the big-money players, and Groupon does not disappoint with institutional interest. Thirty-six percent of the company is held by insiders, and nearly 64% remains institutionally held. Venture capital firm New Enterprise Associates maintains more than 87 million shares; Tiger Global Management holds another 65 million.

In fact, over the past quarter, JANA Partners, Slate Path Capital, Miura Global Management and Capital Tactics Advisors have all increased their holdings in Groupon Inc (NASDAQ:GRPN).

Here are three additional reasons I am bullish on Groupon.

1. Deutsche Bank Upgrade
An analyst at Deutsche Bank AG (NYSE:DB) just upgraded shares of the company from “hold” to “buy” and increased the price target to $10. In addition, the analyst expects Groupon Inc (NASDAQ:GRPN)’s billings to grow by 20% this quarter.

2. Improved Marketing Strategies
Two types of direct marketing include pull marketing and push marketing. Groupon was focused primarily on push marketing. This is when the company sends out emails with the goal of reaching consumers who might be interested in its partners’ products or services.

Pull marketing, on the other hand, is the goal of attracting customers to the Groupon site to search for a variety of local deals. In its most recent quarter, 45% of the company’s North American business came from smartphone and tablet users, and its mobile apps were downloaded more than 7 million times. While sophisticated spam filters may block push email marketing attempts for many users, pull marketing through the website and mobile apps avoids this issue.

In addition, consumers are more likely to purchase several Groupon Inc (NASDAQ:GRPN) deals when browsing the website or app rather than just the one featured in the email blast.

3. Share Momentum
Groupon’s stock has been in an uptrend since November: The price is up more than 100% from its sub-$3 November lows. It has broken above both the 50- and 200-day simple moving average resistancelevels. The uptrend, now 8 months old, shows no technical signs of ending.

Is It Finally Time To Buy This 'Perfect' Business?

Risks to Consider: Groupon Inc (NASDAQ:GRPN) faces several factors acting as headwinds. The first is consumer “deal fatigue,” which means customers aren’t loyal to Groupon and will switch to another deal provider at the drop of a hat. Secondly, deep-pocketed competition springing up from companies like Google Inc (NASDAQ:GOOG) is certain to take customers away from Groupon. Last, many businesses have discovered that more than a few Groupon Inc (NASDAQ:GRPN) clients are purely deal-driven and will not return to purchase items at regular prices, resulting in non-repeat business for Groupon.

Action to Take –> I like Groupon Inc (NASDAQ:GRPN) on a breakout close above $8. If the uptrend continues, then shares could rise to $15 within the next 12 months.

This article was originally written by David Goodboy and posted on StreetAuthority.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!