Groupon: Overpriced Or A Bargain?

Jan.20.12 | About: Groupon, Inc. (GRPN)

Would you like to have an edge over Wall Street analysts by knowing where the price of Groupon (NASDAQ:GRPN) is going well ahead of the next few earnings announcements? I certainly do!

The way to find out the direction of any stock with non-diversified products or services is to know what its customers and potential customers are thinking and matching those thoughts to the assumptions used to value the current stock price. That information is now easy to obtain through electronic surveys like the one found here. My goal is to have Seeking Alpha readers (and people you know) take a brief survey about Groupon, and then I will publish the results in another article within a week. The survey results should tell us if the bulls or bears are right, and give us significant information about the direction of the stock price.

This survey is obviously not endorsed by Groupon or Seeking Alpha, but it is a way to test my thesis that the consumers and/or businesses that use the product of “one-trick pony companies” are the best people to determine the future stock price of those companies. A survey of customers and businesses could be profitable if it shows that the assumptions made from leading analysts are right or wrong.

The timing of my poll is perfect for a GRPN, a growth stock that has no earnings and sports a $12 billion market cap. Believers are buying into the prospect of continuing growth coming from an innovative company. Shorts see increased competition, weakening customer loyalty, high marketing costs leading to weak margins, and the likelihood that profits will never come to fruition. Who is correct?

The answer lies with customers and businesses who have tried Groupon. Do these customers find the discounted deals worthy of purchasing on a regular basis? Or do they now place Groupon emails in the spam filter? Are businesses making money from continued business after advertising on Groupon, or are they likely to find other ways to market their goods and services? A survey of customers is the only way to know before financials are released.

Seeking Alpha readers are a suitable group to answer my survey for several reasons. We are all investors looking for an edge, and getting the answers to a survey ahead of professional investors is appealing. All of us use the Internet with many of us experiencing the Groupon offers. Those of us who have purchase a “deal” already know how much more we intend to use the services of Groupon, and those of us with businesses that have used Groupon -- or know of business who have used Groupon -- are aware of its benefits or lack thereof.

I commit to publish the results of the survey in a separate article in one week or sooner if there are enough respondents to make the results statistically significant.

I shall not do further trading in the stock until the initial results are published.

For the record, I have a small short position in GRPN based upon the negative write-up published in forensic accountant Tracey Coenen’s blog. I’ll gladly go long or short more GRPN in a heartbeat if the survey results indicate bullish or bearish earnings lie ahead.

Have fun taking the survey. It should take less than a minute to answer the questions. Here is the link again: GRPN Survey.

Disclosure: I am short GRPN.