NEW YORK (TheStreet) -- Groupon or Coupons? That?s a choice facing discount site investors who want to capitalize on the growth of online offers but don?t want too much exposure to the space. And many investors on StockTwits.com are choosing in favor of Groupon, (GRPN).
$GRPN Still long and strong. SALE and COUP are a joke compare to GRPN.- Rommel (@mel812) Mar. 31 at 10:45 PM
It's understandable why investors would be interested in the Internet coupon space. Though the Web has long replaced the newspaper circular as the source of discounts, more Americans are now taking advantage of them. Research firm eMarketer predicts that more than half of U.S. adult Internet users will redeem a digital coupon this year. About 70% of those coupons will be redeemed via mobile phone.
Groupon, many cashtaggers say, is better positioned than competitors to take advantage of the popularity in online coupons. The company said last quarter that more than 70 million users have downloaded its mobile app. And, excluding today's April fools joke in which Groupon offers the "rain making" deal of paying $40 for something only worth $20, its deals are usually popular.
More than $5.8 billion of merchandise and services was purchased with Groupon discounts last year. Groupon pulled in $286.7 million in earnings from those sales, excluding some items. Its stock climbed more than 3% intraday Tuesday after falling about 5.7% in the past month.
Groupon is not without its challenges. The company is trying to transition from a push marketing site that people associate with email offers in their inbox into a shopping destination. So far, the results are mixed. Investments in the new direction contributed to a 12-cent fourth quarter EPS loss that investors punished with a sharp sell-off on Feb 21 after the earnings release. The stock isn't exactly cheap either. At the intra day trading price of $8.31, Groupon has a $5.55 billion market cap and trades at 30X expected 2015 earnings. It trades at 2X trailing 12-month sales.
Analysts are mixed on the company. Nine have buy ratings, nine have hold ratings and four slapped sells on the stock, according to stats on the Analyst Ratings Network. The consensus price target is $10.41.
However, Groupon looks like a steal on a P/S basis compared to Coupons.com (COUP), say cashtaggers. Coupons.com has a $1.76 billion market cap and trades at nearly 11X trailing 12-month sales. The jury is still out on what 2015 earnings will be. The company priced its IPO on March 7 at $16 per share. The stock nearly doubled in value by March 17, but has since fallen about 18% from the high. It fell 2.6% intraday to $24.
Analysts are divided on Coupons.com. Today, Goldman Sachs initiated coverage with a neutral rating and a price target that calls for the stock to fall 12.5% from Tuesdays intraday trading price.
RBC capital also has a neutral rating, sector perform in RBC's book, with a $28 price target. Bank of America is more bullish. It has a buy with a $30 price target.
Some cashtaggers are avoiding all the discounters ending in "on." They say RetailMeNot (SALE) is actually the best player in the space, despite a 23% drop in the stock in the past month.
But, most investors on StockTwits.com disagree. Bearish sentiment on RetailMeNot stands at 66%, according to StockTwits' analytics. Meanwhile, Groupon has 63% Bullish sentiment. Coupons.com is still amassing a following. And, much like analyst sentiment, the crowd seems to be divided.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.