Recently, Groupon users made a rush to a deal that the company had with Starbucks Corporation (NASDAQ:SBUX) allowing members to obtain a $10 coffee gift card for $5. The deal was so popular that it literally crashed the Groupon website – temporarily.
One of the keys for Groupon’s continued growth will be determining exactly how the company’s discount model will fare over the long term. This is especially the case given that most coupon users are not repeat customers.
However, Groupon Inc (NASDAQ:GRPN) has a strong balance sheet with $1.2 billion in cash and no debt. With an EBITDA margin in the mid-to-high single digits, and projected revenue growth of almost 10% this year, I expect Groupon’s balance sheet to become even stronger going forward. With all the pros and cons in mind, Groupon is rated by many analysts as a Hold at the present time.
Just as with Groupon Inc (NASDAQ:GRPN), both HomeAway, Inc. (NASDAQ:AWAY) and Tripadvisor Inc (NASDAQ:TRIP) will also need to be careful to keep enticing offers in front of current customers in order to keep users coming back. Like with any other business – whether online or offline – it costs a great deal less to keep your present customers than it does to obtain new ones.
In the world of discounting – especially as it relates to travel – competition is growing. With this in mind, all three companies will also need to continue differentiating themselves in order to stay top-of-mind with their users. Otherwise, price-conscious consumers are likely to jump ship to other options with potentially “better deals.”
The bottom line
As the economy continues to come out of its recessionary mode, consumers are beginning to travel again – although many are still seeking discounts through coupons or other related avenues. In terms of shareholder profitability, HomeAway, Inc. (NASDAQ:AWAY) appears to offer the most – at least at the present time – in terms of both short-term and long-term profitability.
The article 3 Websites That Every Traveler – and Investor – Must Consider originally appeared on Fool.com and is written by Nauman Aly.
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