This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Groupon IPO Hinges on Revenue

NEW YORK ( TheStreet) - Much has been written about whether Groupon is selling damaged goods in its initial public offering or whether its shares will end up being the deal site's best bargain yet .

For many investors, the key to answering that question will be Groupon's massive revenue generating prowess and how the company will manage cash to achieve shareholder returns.

After a dig through of consumer services companies going into an IPO with strong revenue reliant on specialty or internet sales over the last fifteen years, we've come to the conclusion that investors need to ask whether it's the next GameStop (GME - Get Report) and DSW (DSW - Get Report), or if it will flounder like Orbitz (OWW - Get Report) and others.

After Groupon goes public, its end-of-year earnings are likely to show that the company sold over $1.5 billion worth of deals coupons, even if it may lose over $400 million doing so. Few online focused consumer services companies have done IPO's with such a developed business and their fates have varied greatly.

After going public, DSW and GameStop shares have surged, Dex Media and Petco were taken private at significant premiums to their IPO prices and Orbitz, 1-800-Flowers.com (FLWS - Get Report) and BarnesandNoble.com fell flat.

Comparisons between Groupon, Orbitz, Dex Media, Gamestop, DSW, BarnesandNoble.com, Petco and 1-800-flowers.com are strong because they went into their IPO's with hundreds of millions, even billions in revenue. In contrast, Amazon (AMZN - Get Report) had $16 million in annual revenue during its 1997 IPO; Google (GOOG) had $19.3 million in sales - making them incomparable IPOs.

Because of revenue in 2011 already in excess of $1 billion, Groupon is now seeking a less than 10 times 2011 sales valuation in its IPO, significantly lower than its previous 36 times 2010 revenue valuation in June and those used to value LinkedIn (LNKD - Get Report), Pandora (P - Get Report) in their offerings.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AMZN $385.66 0.00%
DSW $37.24 0.00%
FLWS $12.87 0.00%
GME $38.67 0.00%
GOOG $571.34 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs