Groupon: New Numbers Suggest its Shares are a Deal Compared to LivingSocial
While shares of daily deal couponer Groupon (GRPN) have bounced back and are trading above its initial public offering price of $20 – thanks in part to market excitement about a coming IPO, Facebook -- do the concerns that initially sent the stock plunging back in November still hold sway?
Sure, the Chicago-based company is expected to report a profit of 3 cents a share for the last quarter of 2011 on Wednesday. But it's still going to lose an expected 30 cents a share in all of 2011. And the profitability issue, plus concerns over revenue growth, competition, and other factors combined to pummel the stock's initial rise after its IPO last fall.
But as the Wall Street Journal smartly showed recently perhaps performance and valuations are relative.
The Journal's Heard on the Street feature compared Groupon with one of its rivals, LivingSocial, and found the competitor wanting.
Details came from Amazon's (AMZN) recent 10K filing, and the WSJ connected the dots. Since it owns 31% of LivingSocial, Amazon disclosed some of the latter's financials: it had revenue of $245 million and a net loss of $558 million in the year ended Dec. 31, 2011.
Based on a valuation late last year of between $4 billion and $5 billion for LivingSocial, that puts its value at 18 times its revenues. Groupon, on the other hand, has a market capitalization of $15.6 billion and is expected to report revenues of $1.6 billion for full-year 2011. That gives Groupon a valuation of only about 10 times its revenues.
Groupon is already ahead of LivingSocial in terms of how much revenue it wrings out of each of its merchants. And while revenue growth has slowed, it has more than double the amount of email subscribers than does LivingSocial. So it only takes a small percentage of additional users who may have been sitting on their hands during these rocky economic times, to click on a daily deal for Groupon's revenue to start growing again.
Filed under: Company Analysis