Oh, The Places Groupon Will Go
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Now that Groupon (NASDAQ: GRPN) CEO Andrew Mason is gone, is Groupon really any better off? Can it go higher, or is one of the places they'll go be to two bucks or lower? Groupon reported Q4 earnings on Feb. 27 and they were dismal which rhymes with abysmal for an $81 million loss. They also guided lower for 2013. However, the company, like Apple, does have a history of guiding very conservatively. The shares could be pressured after this initial euphoria over Mason's leaving.
With the loss of its clown prince Groupon will have to find a new CEO and soon, as interim CEO and co-founder Eric Lefkofsky has too many business ties that are potential conflicts of interest. DC power broker Ted Leonsis will also help lead the company during the transition.
Where Else Should Your Money Go?
Return on equity is a negative 7.07%. Groupon isn't doing as badly as they were although an $81 million loss for Q4 isn't much of an improvement as well as a loss of $0.10 per share. Competitors Amazon.com (NASDAQ: AMZN) and Google (NASDAQ: GOOG) are just much better alternatives.
Amazon has money (29%) in Living Social, the DC based major competitor to Groupon, which wisely declined to debut in an IPO. Living Social just reported on March 5 they had broken sales records making $8.6 million for a Sam's Club membership deal and in October announced they were taking share from Groupon.
Amazon has their Amazon Local Deals as well. Its forward P/E is still high at 73.61 but no one can deny it isn't the biggest e-tailer and gains share every year. Those who held the stock over the last year have had a 47.42% return. Analysts expect a 40% plus five year EPS growth rate for Amazon. To be fair Groupon's PEG is lower than Amazon's 4.47 at 1.29.
Although Groupon introduced Groupon Goods only a few months ago and it has been a lone bright spot. However, competing against Facebook Gifts and the powerful ecommerce giant that is Amazon is just not enough to recommend Groupon.
Even without any deals Google is a tech powerhouse with search dominance, Android, Nexus tablets, and whatever next big thing they're investing in that only Brin, Page, and Schmidt are privy to. Google is trading with a P/E at 25.03 with a PEG of 1.29. Shareholders have had a 31.25% gain over the last 52 weeks. Analysts expect a five year EPS growth rate of 13.78% for Google.
Almost every day Google hits a new all time high and giddy analysts have been calling for an $1,000 price target which still gives 20% upside.
Why Mason Had TO GO-The Dr Seuss version
All of Mason's antics like working undercover in a Chicago sushi restaurant to better understand the small merchants that use Groupon to promote their business and beers at meetings can't change the fact that Groupon's competition keeps growing with CBS, every local newspaper, and small social media entrepreneurs all coming up with their version of local deals not to mention Travelzoo.
For Groupon, the reasons Mason was made the scapegoat are still the reasons why it is a crazy place to park money. I hope the board at least gave Mason a copy of the late Dr. Seuss,"Oh, The Places You'll Go" as he graduates from the C-suite.
In honor of Dr. Seuss' 99th birthday this year this homage explains simply why Mason had to go.
For a business of deals without any moat,
Spinning your wheels made you the scapegoat.
Your shareholders who lost 80% of their dough,
From twenty five bucks at your grand IPO,
Finally said it's past time for you to Go, Mason, Go!
Because Mr. Mason your rivals were many,
You weren't making money, not even a penny,
You're losing a dime EPS the quarter reported,
Six months more you implored, the Board it just snorted,
Each quarter was bad so the shorties they shorted.
Now that you're gone the stock's up quite high,
From two bucks to three bucks to five bucks, oh my!
Without any debt and one billion in cash,
It's a shame Groupon emails are sent right to the trash.
The return on equity shouldn't be so darn negative,
At 1.29 you have a positive PEGative.
The camel's last straw was the stock still fell lower,
And lower, and lower 'til analysts said,
this is just a no-grower, it's almost half-dead.
When people want deals that are good they just Googled,
and Amazoned when they could, so you're scroogled.
The Board did its duty for the corporation,
Didn't tell you about your double secret probation,
So your BFF and co-founder Eric Lefkofsky
Will sit in your chair and drink your hot cofskee,
If only the people and merchants weren't nervous,
about Groupon's rep for bad customer service.
Groupon Goods gained some traction for e-commerce stuff,
Gross billings were better but it wasn't enough,
Going up against Amazon; that's pretty tough.
You had an idea that seemed pretty nifty,
To sign up small business deals that were thrifty,
Was it your fault that everyone and their brother,
Could offer the same from the garage of their mother?
Good luck Mister Mason as you leave the Groupon morass,
As I'm sure the board told you with kindness and class,
Mr. Mason, don't let the door hit you on the a**.
Oh! The Places You'll Go-Just Not To Groupon
This company has too many pressing issues and Mason wasn't its only problem. Groupon is a business model facing ever increasing competition. Now, Groupon will have to find a new CEO. Good luck with that as any incoming CEO will have a huge mess to clean up. As Dr. Seuss put it best in The Cat In The Hat-
And this mess is so big,
And so deep and so tall,
We cannot pick it up,
There is no way at all!
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