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.

blog comments powered by Disqus
Insider Monkey Headlines
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

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!