 |
|
|
There are three main problems that |
|
|
we see with Groupon's business. |
|
|
Released on Tuesday, November 7, 2011, 8:00 PM ET
Pittsburgh, PA (SpeculatingStocks) - Groupon (NASDAQ:GRPN) just went public last Friday and as expected it had a huge IPO. GRPN shares spiked to $31.14 and shares closed up $6.11 to $26.11 or 30.55%. Trading dollar volume was over $1 billion.
The company raised $700 million and is valued at close to $13 billion.
There are three main problems that we see with Groupon’s business:
#1 – Their business model of 50% off puts significant pressure on retailers. The value model may not work out for retailers and Groupon risks this 50% model becoming played out.
#2 – Ad costs are high to acquire new opt-in subscribers.
#3 – Competition is rampant in the daily deals space. Entry to market is low and small entrants to the daily deals space can take market share away from Groupon. Then there is a large player like LivingSocial.com, which is competing very strongly against Group.
Groupon could grow into a great company in the long-term, but it faces several hurdles. The mania for GRPN shares reminds us of the dot com bubble. We wouldn’t be surprised to see GRPN shares in the mid-teens within a month. LNKD was another hot IPO that got chopped from a peak of $120 to as low as around $60 in less than a month.
Find more stocks on the SpeculatingStocks homepage.
Comments:
