Competitive Threats
While Groupon’s 200 million subscribers can’t compare to Facebook Inc (NASDAQ:FB)’s over 1 billion active users, the difference is Groupon is built around commerce, Facebook is built around relationships. Traditional retailers like Target are a direct threat, as the company offers a much broader selection of goods than Groupon can. Where Amazon is concerned, they offer a huge selection, but have very little that is Amazon exclusive.
The best way to determine Groupon Goods value is by using a real world test. As of this writing, Groupon has a ASUS Transformer 10.1” tablet and dock bundle for $399 with free shipping. This exact same item through Target is $399.99, plus an additional $149.99 for the keyboard dock. Through Amazon the tablet is $314.99, and the dock is another $103.91. In short, the Groupon deal is 4.75% cheaper than Amazon and 27.45% cheaper than Target. Through Groupon, customers also get two years of 50GB of cloud storage for free. As you can see, Groupon Goods offers real values that neither Target nor Amazon can match.
The Future
The company said, “Groupon Goods has evolved into a second major category that our customers clearly love.” Groupon’s revenue from Groupon Goods increased 1,921% versus last year, and now makes up more than 25% of total revenues. Considering that this business just launched in the last year, this growth is nothing short of amazing.
With 37% more active customers on a year-over-year basis, it’s a good bet that many of these customers became active due to Groupon Goods. The company saw a huge increase in free cash flow of 123% over the last 12 months. Groupon also keeps adding more and more deals, with more than 27,000 available in this last quarter.
Another reason investors should give Groupon a serious look is the company’s relative valuation. In the next few years, analysts expect the company to grow earnings by over 27%, yet the shares sell for about 24 times forward estimates. By comparison, Target sells for 12.75 times projected 2013 earnings, but is expected to grow EPS by 11.67%. Amazon is expected to grow earnings by 40%, but carries a P/E ratio of over 180. These figures indicate that Groupon has the lowest PEG ratio of the three at 0.89, compared to 1.09 at Target and over 4.5 at Amazon. Groupon is a company that has the goods, but the market hasn’t realized this yet. Don’t make the same mistake, add GRPN to your personalized Watchlist today.
The article I’ve Got The Goods On This Company originally appeared on Fool.com and is written by Chad Henage.
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