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.
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).