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  • Examining Groupon's Q3 Results: Neither Solid Nor Indicative Of Its Long-Term Potential [View article]
    By that logic, the company's accounts receivable should then also count as cash. After all, the company will convert them into cash at some point, just as it will with accounts payable and merchants payable (which are far larger than accounts payable). Net cash calculations need to be calculated using cash and true debt, not working capital assets and liabilities. That is true for all companies, not just Groupon. While it is true that Groupon has $573.477 million in merchants payable, that entire balance will never be paid off. It will be rolled over, as "maturing" payables are replaced with new ones. The same is true of accounts receivable. Groupon will never fully convert them into cash, because they will be rolled over constantly, with the company converting some into cash as new receivables come in.
    Nov 10 12:32 PM | 2 Likes Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    Admittedley, GAAP EPS was distorted by this one-time E-Commerce transaction. Then what is the right metric? Non-GAAP EPS? Operating cash flow? Free cash flow? Groupon posted positive non-GAAP EPS (8 cents), as well as positive operating cash flow and free cash flow.
    Sep 19 09:21 AM | Likes Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    That leads into a question of how to define financial traction. To us, GAAP profitability is a sign of financial traction. And in Q2, Groupon posted GAAP profit of 4 cents per share, or $28.386 million (the company posted EPS of 8 cents on a non-GAAP basis). As for SG&A, in Q2 2011, SG&A accounted for 57.58% of revenue, and in Q2 2012, that figure fell to 52.77% (http://bit.ly/QYIrMr), due to various investments that Groupon is making to streamline its operations.
    Sep 19 01:03 AM | Likes Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    Facebook has already tried to enter the daily deals market, but pulled out after 4 months due to an inability to compete (http://reut.rs/QlZVmt). It is not enough to simply launch a website and run some deals on it. To succeed in daily deals, a company has to create relationships with merchants, support their deal campaigns, and offer users a compelling mix of deals (among other things). Amazon and Google are currently in this business, but so far, there has been little to suggest that either company has been able to overshadow Groupon in this sector.
    Sep 18 09:19 PM | 1 Like Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    When it comes to investing, it is important not to equate personal experience with a company with its investment potential. For example, people may not like the harmful health effects of tobacco, or believe that cigarettes have any consumer benefit. But that should not be what leads you to not invest in tobacco companies. What should drive that decision is their financial performance, as well as the future prospects of that company. Grouopon's deals and goods differ in every city and market that it is in, and it is not enough to simply look at the product/deal selection in one market. What matters is Groupon's deal strength on an aggregate level.
    Sep 18 09:14 PM | Likes Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    It is important to remember that we are comparing perceptions of Microsoft and Groupon, and not their operating models. In the first few years of Microsoft's existence, people were skeptical that the company could succeed, or that there was even a need for their product.

    On the surface, it does seam that there are no barriers to entry. But, a closer look shows that there are. Groupon is not a company that can be run off of a single laptop. It takes almost 13,000 employees to do what Groupon does. And many daily deals sites have been unable to gain traction, at least from a financial standpoint. Google has slashed payroll at its German daily deal subsidiary, and LivingSocial lost $96 million last quarter on revenues of $138 million (http://read.bi/PQJLBo).
    Sep 18 09:09 PM | Likes Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    Goods revenue is split, with some being recognized as third party revenue, and other revenue recognized as direct revenue (per the company's 10-Q filing). Q2 happened to be the first quarter where direct revenue was material ($65 million vs. $19 million in Q1 2012). Groupon takes title to inventory, and as CFO Jason Child said on the call, " as we developed the infrastructure this quarter, we moved to a model where we could take title to inventory for the majority of shipped products sold in North America. In cases where we are the primary obligor, are subject to inventory risk and have latitude in establishing pricing, we record revenue on a gross basis. In all other cases, we recognize the revenue as third party and record it on a net basis." (http://seekingalpha.co...)

    There is no inventory line item on the balance sheet, nor is there an inventory line in the company's cash flow statements. It is possible that Groupon classifies inventory as other current assets, because the meaning of inventory is not the same to Groupon as it is to a more traditional retailer. Admittedly, this is another instance of where Groupon should realize that increased transparency is better for its stock price, as the company's history means that the market assumes it is guilty until proven innocent.
    Sep 18 12:47 PM | 1 Like Like |Link to Comment
  • Groupon: Why This Misunderstood Company Is A Buy Near $5 [View article]
    It is true that Groupon has had issues with accounting. But we believe that the company has shown that it is working hard to resolve those issues. After restating earnings, CFO Jason Child said that the company is working to beef up internal controls. And the company appointed Brian Stevens as CAO this month. With 16 years of experience at KPMG, we think that Stevens will provide solid accounting oversight. In addition, Groupon's board was revamped in April, adding Daniel Henry, the former CFO of American Express, and Robert Bass, the former vice chairman of Deloitte. That adds another layer of accounting expertise to Groupon. The accounting issues are being resolved.

    As for Lefkofsky's sales, he is fully within his rights to do so. As a co-founder and early investor in Groupon, he helped launch the company and get it to where it is today. And as long as everything is legal, he can transfer shares between his funds all he wants. It is important to note that not all early backers have cashed out. NEA still owns over 13% of Groupon, and they have made no indications of wanting to divest that stake (http://yhoo.it/M3FBS0)
    Sep 18 12:22 PM | Likes Like |Link to Comment
  • Buy Groupon: An Examination Of Merchant Satisfaction And Accounting Shows That Issues Are Being Resolved [View article]
    We don't see that article as a complaint. Groupon was created for one purpose, to make money for its investors. The funds that participated in that January round knew full well what they were signing up for, and they too invested in Groupon to receive a profit on their investment. What matters here is the scale of the distributions early investors receive. And to be frank, in the end it all evens out. What we mean by that is that if early investors use most of a new funding round to generate profits for themselves, then the company will need more funding for its operations. That would likely result in the dilution of those very same investors.
    Jun 15 11:53 AM | Likes Like |Link to Comment
  • Buy Groupon: An Examination Of Merchant Satisfaction And Accounting Shows That Issues Are Being Resolved [View article]
    Groupon has sold off in anticipation of the expiration, not sales themselves. Groupon's insider sales would be fully disclosed in SEC filings, available here: http://bit.ly/Nys8FK

    After the June 1 lockup expiration, there have been 3 insider "sales" by Goupon executives, including the general counsel and CAO. These have not been outright sales, but the sales of RSU's that have vested. Though the lock-up has expired, it is not a guarantee that there will be a flood of sell orders from insiders. NEA, for example, owns almost 14% of Groupon (http://yhoo.it/M3FBS0), and it is unlikely that it will want to liquidate its stake rapidly, given where Groupon is currently trading at
    Jun 13 01:08 PM | Likes Like |Link to Comment
  • Is Groupon Now A Buy? Exploring Both Sides Of The Debate [View article]
    That gets into the issue of personal shopping habits. Do consumers really evaluate things on a transaction by transaction basis? Retail is habit-forming, and consumers may stick with a retailer, even if it may not have the product they want at the lowest price. Can Groupon achieve the same habit-forming attachments in the mind of consumers? It is certainly possible.
    Apr 25 12:04 PM | Likes Like |Link to Comment
  • Is Groupon Now A Buy? Exploring Both Sides Of The Debate [View article]
    That data was taken from credit suisse estimates for 2012 FCF. the ratios, however, have been adjusted to reflect GRPN's current market price, not the $18.38 at the time of that research.
    Apr 25 11:59 AM | Likes Like |Link to Comment
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