Amazon.com, Inc. (AMZN) & Renren Inc (RENN): Why These Two Companies Are Much Better Deals Than Groupon Inc (GRPN)

There are better deals

So far we know that despite growing its user base steadily, Groupon Inc (NASDAQ:GRPN)’s business model has strong flaws that make it hard to attract merchants. Plus, Groupon’s stock is certainly not cheap, at least not at $8.50 per share and with a forward P/E ratio as high as 54.9, according to Morningstar. This involves a $5.64 billion market capitalization, way too high for a company that is not profitable. Groupon lost nearly $4 million last quarter, has a negative EPS and may soon get a cut of the revenues from companies, in order to keep merchants interested and attracting more coupon sales. There may be better alternatives.

Amazon.com, Inc. (NASDAQ:AMZN) is well aware of the merits that local deals can have, and is providing some through AmazonLocal. But that’s not all–the company has also invested in daily deals company LivingSocial, which posted sales of $135 million in the last quarter (up 23% a year ago), but also swung to a net loss of $50 million, from net income of $156 million in Q1 2012. That being said, there is an interesting risk/reward asymmetry here. Amazon.com, Inc. (NASDAQ:AMZN) has 29% equity stake in the company, so if LivingSocial ever turns profitable and massively successful, Amazon could have amazing returns on its investment. But if things go south, Amazon.com, Inc. (NASDAQ:AMZN) won’t be in any danger because the company portfolio is well diversified.

Chinese Renren Inc (NYSE:RENN) also has some interesting exposure to the daily deals segment. Noumi.com, Renren Inc (NYSE:RENN)’s group buying business, is an early star, as sales have increased over 100% year-over-year and user metrics continue to be solid. They reached 3.1 million active paying users and a repeat ratio of 54%. Impressive, to say the least. With a $1.1 billion market cap, Renren Inc (NYSE:RENN) could be a better deal than Groupon Inc (NASDAQ:GRPN), as Renren Inc (NYSE:RENN) has several products to diversify risk, from wedding sites to one of the most widely-used social networks in China.

The article Why These 2 Companies Are Much Better Deals Than Groupon originally appeared on Fool.com and is written by Adrian Campos.

Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Inc. (NASDAQ:AMZN). The Motley Fool owns shares of Amazon.com. Adrian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.