This Day On The Street
Continue to site
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

Groupon Loses its Group

NEW YORK ( TheStreet) -- I received quite a bit of hate mail for suggesting what Wall Street already knows -- local deals giant Groupon (GRPN - Get Report) was essentially about to expire. I offered my opinion and what I thought was a pretty good argument.

My premise was simple -- although the company has a great idea, it just does not seem sustainable -- at least not in its current format. As we are currently finding out with Facebook (FB - Get Report) not every idea makes a great investment. Like Facebook, Groupon has seen "its share" of turmoil -- both literally and figuratively.

What has resulted is a drastic drop of over 70% in value since reaching its six-month high of $25.84. The question however is not so much "why?" but rather, "what has taken the market so long to come to its senses?" I guess you can say Groupon is no longer being accepted.

Aside from a business model where it puts merchants at some possible severe disadvantages to the extent of revenue losses in the areas of 50% to 70% below their standard rate for their product or service, but also what exactly would it take to launch a Groupon-like service? It would take little to no investment at all.

So the question is, how exactly can a company with little to no competitive leverage ever earn a profit -- one that could justify a long-term investment? With the stock's precipitous decline the only conclusion one can safely draw is that investors have seen the light. They now realize that Amazon (AMZN - Get Report), a rejuvenated Yahoo! (YHOO - Get Report), Google (GOOG - Get Report) and Facebook could easily take whatever business Groupon has. They only need to want it bad enough.

What's more, even if a company does not have a prominent name like the ones mentioned above, it might only take a targeted mailing list to select clients based on existing spending habits to send Groupon out of business. The perfect example is Open Table (OPEN) was when it first launched its OpenTable Spotlight.

The result was overwhelmingly successful as it stole a great portion of Groupon's restaurant market share. So just imagine what Amazon or Yahoo! might be able to do.
1 of 2

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
Only $9.95
14-Days Free
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
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMZN $502.13 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
GRPN $2.45 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs