The meteoric rise of Groupon Inc (NASDAQ:GRPN) in 2013 has recently slowed down. Nonetheless, shares of the company have outperformed leading online companies such as Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). Will Groupon Inc (NASDAQ:GRPN) continue to outperform other online companies? Is this company a long-term investment worth having in your portfolio? Let’s try to tackle these questions.
First let’s turn to the retail market and specifically online retail.
Non-store retail is rising
According to the recent Census report (opens pdf), retail sales slightly increased by 0.6% during June and by 3.7% during the first half of 2013 compared to 2012. The non-store retail sales sharply rose in June by 13.8% compared to June 2012 and by 11.2% in the first six months of the year. Online shopping sales (opens pdf) account for approximately 53% out of the non-store retail sales and 5.5% of total retail sales.
During the first quarter of 2013, online-shopping sales grew by 15.3%. This growth rate in online retail, which is higher than the total retail and non-store retail growth rates, is likely to keep augmenting its share in the retail market. Moreover, the online-retail-stores sales growth rate could serve as a good benchmark for this industry to compare the growth rate of other companies, such as Groupon Inc (NASDAQ:GRPN) and Amazon.com, Inc. (NASDAQ:AMZN).
Growth in revenue
During the first quarter of 2013, Amazon’s net revenue grew by almost 22% compared to the same quarter in 2012. This growth rate is higher than the average growth rate in online-retail sales in 2013 so far. Looking forward, Amazon’s revenue is expected to rise by 13% to 26% in the second quarter, which is still inline with the growth rate of online-retail-stores sales. This means Amazon.com, Inc. (NASDAQ:AMZN)’s sales are likely to keep growing at the same or higher pace as the industry’s average.
In the first six months of 2013, eBay Inc (NASDAQ:EBAY)’s net sales grew by a similar pace as online-retail sales: eBay’s net sales increased by 14.2% in the first half of 2013 compared to 2012. Looking forward, the company projects its revenue will be between $16 billion and $16.5 billion in 2013, which represents a 14.3% to 17.8% growth in sales. At the current pace, it coincides with online-retail-stores sales growth.
On the other hand, Groupon Inc (NASDAQ:GRPN)’s net revenue increased by only 7.5% in the first quarter of 2013. The reason for the low growth rate in revenue is due to the 18% decline in international revenue. On the other hand, North American net sales grew by 23%, which is higher than the online-retail market.
So Groupon Inc (NASDAQ:GRPN)’s revenue is growing at a slower pace compared to leading online companies such as Amazon and eBay Inc (NASDAQ:EBAY). Finally, Groupon’s revenue is expected (according to the company’s outlook) to rise by no more than 10% during the year, which could be less than the growth rate of total online-retail sales and other leading online companies. This isn’t a good selling point for owning Groupon.
Let’s turn to examine Groupon Inc (NASDAQ:GRPN)’s profitability.