Groupon's Negative Rate Of Change Suggests Another Webvan

Oct. 28, 2011 11:42 AM ETGroupon, Inc. (GRPN)P, Z, GOOG, AMZN, MSFT8 Comments
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Based in Chicago, Ill., Groupon - proposed symbol NASDAQ:GRPN -- scheduled a $510 million IPO with a market capitalization of $10.8 billion at a price range mid-point of $17 for Friday, November 4, 2011.

Groupon’s negative rate of change in key metrics suggests that that Groupon is today’s Webvan (1999-2001). Webvan was the largest dot-com flop in history.

RATE OF CHANGE
Many stock market traders pay close attention to the speed at which one variable changes relative to another. Rate of change is the speed at which a variable changes over a specific period of time. It measures momentum.

CONCLUSION
Groupon may be worth a quick flip in the IPO market. However, the analytical results below should give long-term Groupon investors considerable pause.

Rate of change analysis proves that the Groupon high flying rocket is headed down.

Notice the quarterly change in Groupon’s sold is only 1%. Other quarterly changes are –21% for Groupons sold per customer; -17% for subscribers added; -12% for customers added; and -14% for revenue per customer.

Quarterly results

June 2010

Sept, 2010

Dec, 2010

March, 2011

June 2011

Sept, 2011

Revenues ($mm)

$39

$82

$172

$296

$393

$430

Rev increase over prior qtr

110%

72%

33%

9%

RATE OF CHANGE ANALYSIS

Qtrly change in Groupons sold

97%

73%

16%

1%

Qtrly change in Groupons sold per customer

1%

-1%

-21%

-21%

Qtrly change in subcribers added

167%

11%

0%

-17%

Qtrly change in customers added

96%

54%

7%

-12%

Qtrly change in revenue per customer

7%

-2%

-9%

-14%


VALUATION
Groupon is trying to value itself by comparing its book value with Linkedin (LNKD) and Pandora (P), all in the range of 20+ book value.

Groupon is also offering a price-to-sales discount relative to LNKD, P and Zillow (Z

This article was written by

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During the IPO season Francis Gaskins, editor of IPOdesktop.com & director of research for Equities.com, regularly appears on CNBC TV, Bloomberg, thestreet.com & other financial cable channels. On the day of the Visa IPO he appeared on four cable TV financial shows including Bloomberg & CNBC. Over the past five years he has been quoted over 500 times by such financial media as the Wall Street Journal, Bloomberg, Reuters, Associated Press, USA Today among others. Those quotes are available at IPOdesktop.com. His varied personal interests include violin playing. For example, he is concertmaster of the Palisades Symphony. He also holds an MBA from Harvard Business School (finance) and an AB from Princeton University (economics). http://www.facebook.com/profile.php?id=100001524943912

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