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  • Groupon Gets an Upgrade by Morgan Stanley Analyst from Equal Weight to Overweight

    Groupon shares are on the rise this morning as after Morgan Stanley analyst, Scott Devitt, raised the company’s status from Equal Weight to Overweight.

    Despite closing just above $10 per share on Friday, early morning trading reached as high as $11.07, and Groupon is currently trading for $10.75 per share.

    Scott Devitt, analyst for Morgan Stanley comments on Groupon’s performance:

    “Groupon has emerged as the leading local e-commerce company in an industry with significant barriers to scale,”

    “Its advantage due to scale (largest merchant and customer base) and technology (8 acquisitions year to date) has enabled it to accelerate North American revenue growth while improving its margins.”

    Devitt also believes Groupon has the capacity to meet the following highly-debated challenges:

    * Preserve its competitive position as local e-commerce leader…

    * Maintain a ~40% take rate within daily deals segment…

    * Continue to grow revenue while expanding margins and…

    * Avoid deal fatigue by continuing to improve targeting and personalization.

    If you recall, a little over a week ago, Groupon was suffering badly on the stock market as shares fell below $10, and the overall market value of the company slumped below a $6 billion market cap, or less than what Googled offered to buy them for back in 2010.

    It is also worth noting that Groupon’s IPO lockup period just ended, and some investors may have been eager to relinquish their shares of the company after a calendar year of poor performance.

    This doesn’t mean Groupon is out of the woods yet, but it is a bit of good news in a very conservative investment market. Perhaps Groupon can get its stock back up to IPO prices.

  • Groupon’s Worth Less Than What Google Offered in 2010

    Groupon had their opportunity back in 2010. Google offered to buy their company for a whopping $6 billion, but they decided to fight the good fight and go public.

    The bad news for Groupon and their investors is that shares have never been worth what they sold for in the IPO and yesterday, Groupon fell below the $6 billion market cap that would have made that Google offer a seemingly better deal.

    Currently shares of the company are trading at around $9, which is the lowest they have ever gone. As you might already know, Groupon’s IPO lockup period just ended and they may explain some of the trading, but it certainly doesn’t account for the near 27% tumble in value. Market capitalization is at about $5.8 billion as things stand right now.

    Of course, one cannot overlook the company the shares keep with the Facebook IPO so closely synchronized with the end of the Groupon IPO lockup period. Facebook crashed from their $38 per share target price down to $27 in just a few weeks of trading.

    This monumentally terrible performance has surely had an adverse effect on investor’s willingness to buy into internet-based stocks. In fact, Facebook’s IPO has probably turned more small investors off the market that any other in recent history, and with good reason. Shady dealings seem to be the new standard when it comes to internet IPOs.

    Obviously I’m referring to Morgan Stanley’s selective distribution of a revised earnings forecast that conveniently never reached small investors despite being available almost ten days before the much anticipated Facebook IPO. It screwed small investors big time. Groupon has some of the same non-sense going on with their financials. After all, their first financial earnings report had to be revised because it was found to be completely inaccurate.

    More interesting news from the wonderfully deceptive world of Groupon comes from their most recent earnings report, which is the first under the guidance of new financial leadership, and features some unexpected revenues accompanied by a strange spike in trading prices.

    Once again, a closer examination of Groupon’s quarterly financials revealed cash listed as an asset that could just as easily be a liability if things don’t continue on as projected. I would say crashing stock prices and an investigation by the Financial Industry Regulatory Authority (FINRA) constitutes things not going as planned.

    But to be perfectly fair, Groupon’s CEO, Andrew Mason did advise his shareholders that Groupon was going to be doing some pretty radical things in order to grow the company and that they should hold on for a bumpy ride.

    Andrew Mason, Groupon CEO, comments on Groupon’s road to success in a letter to stockholders:

    “I warned investors of a bumpy road—an unfortunate side effect of our unprecedented growth. Groupon has scaled to more than 11,000 employees and 48 countries in only three-and-a-half years. Why move so fast? We believe that Groupon is standing before an enormous opportunity, one that hundreds of competitors large and small have seen. Although there are risks in moving too fast, companies often don’t survive long enough to apologize for moving too slow.”

    Check back regularly for more updates on Groupon and Facebook. It seems internet IPOs and stocks are the best scandals going right now. Maybe they are good investments, there’s always plenty of interesting news coming out of them.

  • Groupon Stock Spike; Something’s Fishy?

    Something looks fishy to regulators over on Wall Street. Groupon shares jumped an incredible 18.5% Monday from their close on Friday. Coincidently, Groupon announced their first profit ever in their first quarter earnings report for 2012, just after the stock market closed that evening. More than 16 million Groupon shares changed hands that day.

    Now the Financial Industry Regulatory Authority (FINRA) is investigating the matter, because something just doesn’t add up from their perspective. If you recall, Groupon has performed poorly for investors since its public offering and stock prices have yet to even approximate IPO prices. In fact, shares have even dropped as low as 50% the Initial offering price.

    In a recent letter to Groupon stockholders the company’s CEO, Andrew Mason unveiled his plan to change the landscape of local commerce using Groupon’s power of promotion. He also issued a warning to shareholders:

    “I warned investors of a bumpy road—an unfortunate side effect of our unprecedented growth. Groupon has scaled to more than 11,000 employees and 48 countries in only three-and-a-half years. Why move so fast? We believe that Groupon is standing before an enormous opportunity, one that hundreds of competitors large and small have seen. Although there are risks in moving too fast, companies often don’t survive long enough to apologize for moving too slow.”

    So we’ll see what the investigation turns up. It seems awfully suspicious that they were struggling for so long, then they elect some financially savvy board members and three weeks later they have a winning first quarter financial report. Boy do these guys know how to manipulate some numbers or what?

  • Groupon’s Q1 2012 Results Might be Misleading

    Groupon’s shareholders must have been rejoicing over the company’s most recent earnings report even though stock hasn’t quite made it back up to the IPO pricing. In fact, it is the first quarter Groupon’s statement has even reflected a profit.

    Unfortunately, like many things, there’s more to the story than meets the eye. The crew over at Business Insider have pointed out something that, if not studied carefully, could go unnoticed. The way they see it, Groupon has about $60 million on their books that doesn’t really belong to them.

    Take a look at Groupon’s Revenue vs Expenses Chart from their 2012 Q1 report:

    groupon earnings

    Essentially it is true that Groupon has reduced operating costs and increased revenue, but there are other factors at play that may be misleading. For instance, Groupon has about $46 million in unpaid merchant accounts and another $13 something million in various other debts which are all being left out as far as debts go, and then being counted as cash on hand.

    By Business Insider’s calculations, this leaves Groupon about $60 million in debt unless revenue continues to rise at the same rate it did last quarter. This could be a serious threat to their livelihood, especially for a company whose business model is still evolving and could suffer countless other setbacks along the way.

    By no means is this the definitive state at Groupon, but it does create a different interpretation of their most recent financial report. It’s something to think about going forward in 2012. As always, we will keep you updated as Groupon continues to expand and grow their business.

  • Groupon Finally Earns a Profit, Stock Shoots Up 18%

    Groupon has shocked Wall Street with their first ever profitable quarter. Their first quarter 2012 financial report is in and things are looking really good. Revenue has increased almost 90% and they brought in $559.3 million as compared to only $295.5 million at the same time in 2011. Gross billing for the quarter reached $1.35 billion which is a 103% increase over last year, which came in at $688.2 million.

    Operating cash flow also increased dramatically at 367% to $83.7 million, which sounds really great if you compare it to last years $17.9 million. non-GAAP cash flow amounted to $70.6 million. Net loss attributable to stockholders improved to $11.7 million, which actually reflects a loss of $0.02. This is good news because last year in quarter one they lost $146.5 million or $0.48 per share. Other losses include a net of $34.6 million in tax expense, or $0.05 per share. Non-GAAP earnings per share attributable to common stockholders for the first quarter 2012 improved to $0.02.

    Andrew Mason, CEO of Groupon comments on the results of their first quarter earnings in 2012:

    “We are pleased to report a record quarter that demonstrates our progress in unlocking the opportunity in local commerce for merchants and customers worldwide,”

    Here are the highlights Groupon has listed on their financial report for this Q1 2012:

    * Rapid acceleration of North American revenue growth. North American revenues grew 75% year-over-year and accelerated sequentially faster than they have since the first quarter of 2011. North America’s continuing growth was due in part to technology innovations such as deal personalization that Groupon plans to introduce to the majority of its international operations by the end of this year.

    * Strong consumer and merchant satisfaction. Groupon commissioned ForeSee, a leading market research firm, to assess merchant and customer satisfaction using their standard methodology. Groupon’s March 2012 U.S. consumer satisfaction score of 83 places the Company among the highest surveyed and within approximately 2 points of the 5-year #1 average satisfaction score for online retailers. Groupon’s March 2012 U.S. merchant satisfaction score of 79 also ranks high, considerably above the B2B benchmark of 64 and the Fortune 500 score of 69.

    * New customer milestone. As of March 31, 2012, Groupon surpassed the 35 million active customer mark, ending the quarter with 36.9 million active customers, an increase of 140% year-over-year.

    * New merchant milestone. The first quarter 2012 marked the first time that more than 100,000 unique merchants were served in a single quarter. In addition, in the first quarter, more than 50% of offers were with merchants who had previously run on Groupon.

    * Merchant tools gaining momentum. Groupon Rewards continues to expand. During the past two months, more than 30% of eligible daily deal merchants in pilot cities signed up for the program. Early results suggest that Rewards customers are more loyal than other customers. Groupon Scheduler has also seen early success, with more than 2,500 merchants signed up to date.

    * Growth in mobile and Now! In April 2012, nearly 30% of North American transactions were completed on mobile devices, compared with 25% in December 2011. This growth has created momentum for Groupon Now!, which recently surpassed 1.5 million Groupons sold. Now! achieved this milestone faster and within fewer markets than the daily deals business.

    * Increased leverage from marketing spend. In the first quarter 2012, approximately the same number of customers were added as in the fourth quarter 2011, while marketing spend decreased by 25%. At the same time, the number of repeat purchasers grew 1.5 times faster than the number of unique purchasers.

    Of course these profits caused the stock to surge up 18% on Monday, but even with the renewed interest in holding shares of Groupon, the stock still remains about $20 cheaper than its initial offering price. Still, there’s hope that this quarter is just an indicator of things to come for Groupon.

    You might recall that Groupon welcomed some new addition to their board of directors earlier this month. Daniel Henry, chief financial officer at American Express, and Robert Bass, vice chairman at Deloitte LLP, joined the team in order to bring some welcome financial expertise to operations.

    These additions combined with Andrew Mason’s vision for the future of Groupon and local commerce may be the path to success investors have been hoping for. We’ll keep you updated as things continue to evolve over at Groupon.