Groupon (GRPN) ranks among the largest social, mobile, global e-commerce companies and is revolutionizing the way merchants market products and services. Groupon customers find incredible deals at up to 50% savings. What began as a daily deal coupon sent to your email has evolved into a powerful marketing behemoth. Praised for cutting edge innovations, the company continues to grow with the goal of world e-commerce dominance. Groupon's CEO Eric Lefkofsky had this to say:
Our vision is to make Groupon the place you start when you want to buy just about anything, anywhere, anytime.
Most investors know that Jim Cramer has been one of Groupon's harshest critics, calling Groupon a "broken company" back in 2011. But more recently, Cramer has seen the light and joined the choir of analysts singing Groupon's praises. Cramer reversed his position and started recommending Groupon to his Mad Money audience. In November 2013 Cramer blogged:
Chairman Ted Leonsis and CEO Eric Lefkosky have cracked the mobile code for Groupon and a mobile coupon and deal company is much more powerful than a static one. The company's a cellphone marketplace. It's going to be a very big stock for 2014.
Not everyone shares Cramer's optimism. Naysayers scoff at Groupon's success. They insist investors pay no attention to Groupon's forecasted 2013 record breaking annual revenues, estimated at $2.5 billion, and totally ignore Groupon's $0.02 EPS non-GAAP that beat analyst estimates in Q3 2013 and are expected to blow out Q4. They hope investors will not realize Groupon's North American revenues jumped 24% YOY in Q3 and combined global revenues jumped 4.7%. They think investors will overlook the fact that management developed the world's largest mobile e-commerce platform, allowing Groupon to transact 40% of its Q3 deals on mobile devices.
Naysayers see Groupon as nothing more than a digital spam company and suggested Groupon would be bankrupt by now. However, and much to their chagrin, the exact opposite happened. Groupon is growing revenues, creating the first global discount world marketplace, and has become the dominate mobile e-commerce player on a global scale.
Groupon is changing, adapting, growing and morphing into a mammoth e-commerce business with the largest discount mobile sales transactions. With more than 60 million apps downloaded and growing, it has become impossible to deny or ignore Groupon is headed higher.
Here Are The 7 Reasons Why Groupon Is A Buy
Global Partner Network ("GPN") - This is one of the most lucrative revenue channels ever conceived for both Groupon and its affiliate partners. Partners place a Groupon link, tile or banner ad on their website, Facebook page or blog that directs visitors to Groupon's deal page. When a visitor clicks through and purchases the deal, partners earn 5% to 10% of the deal. Partners with substantial traffic will earn a hefty commission check. The social networking implications are in their infancy and expected to grow exponentially as affiliates grow from the present 10,000 to an expected 100,000 globally.
Mobile E-Commerce Explosion - Groupon's mobile e-commerce expansion has made Groupon the largest discount mobile e-commerce company in the world. More than 40% of all Groupon's transactions were generated on mobile devices. Groupon's penetration into mobile e-commerce and social engagement channels is exploiting the social media craze that is sweeping the world.
World Marketplace - Groupon has developed a gigantic world marketplace. Their global footprint captures over 500 markets in 48 countries and growing. Their ability to rapidly move products and services through their global market place is second to none. In less than 24 hours Groupon sold over $11 million in sales for The Gap by selling 400,000 deals. Retailers are discovering that they can move inventory and excess inventory overnight through Groupon's global marketplace.
Five Major Revenue Channels - Groupon's global expansion is wide and far reaching. Sophisticated channels bring both consumers and merchants together, creating highly desirable discount transactions. Below is a brief description of each channel.
National Brands - With millions of subscribers and sophisticated targeting, this channel allows national chains to market to a massive audience of quality customers.
Getaways - Forget those other travel sites, Groupon's discount deals are the first place to shop your vacation. Pre-purchase your discounted steal of a deal with major brands across the globe.
Local - Small business will reach the local consumer through this channel. Groupon will design a campaign and provide quality consumers who are shopping the specific goods or services of that small business.
Live - Live events means discounted tickets for an upcoming performance of just about anything in your area or around the world.
Goods - Merchants sell excess inventory or new products to a huge audience of active, eager shoppers. Groupon matches the goods or services being offered to qualified customers.
No Debt - Groupon is well capitalized with $1.1 billion cash and cash equivalents and no debt. EPS GAAP and non-GAAP were $0.00 and $0.02, respectively. Full-year 2013 revenue is projected at $2.5 billion and 2014 full-year $2.9 billion.
Trading At A Discount - Groupon is trading at a 30% discount to its 52-week high of $12.76 set back in September 2013. Groupon is currently trading just above $9.
Analysts Forecast - Analyst see a higher share price for Groupon. Numerous respected firms and analysts have buy ratings and upgrades on Groupon with targets ranging from $11 to $16. These valuations are carefully calculated and far from excessive in the context of today's market and economy, more here.
Before concluding I want to address the insider selling that took place earlier this month. It was not wholesale dumping as some suppose. I commented and explained the profit taking in a recent blog. You should note that about 64% of Groupon's shares are owned by institutional investors and over 30% held by insiders. The CEO sold abou half of 1% and still holds 99.5% or 108.9 million shares. So before you buy into the lie of "insider dumping," do yourself a favor and check out the facts. All insiders sell a few shares at some point. There is no reason to construe this as anything other than a little well deserved profit taking.
Conclusion
When you consider Groupon is trading around $9 per share, the strong institutional ownership, analysts' upgrades, back-to-back YOY revenue growth, no debt, $1.1 billion cash, mobile growth and entering Q4 with record breaking annual revenues ($2.5 billion), it becomes easy to see shares rising to $13 as the first leg up and then $15.
Disclosure: I am long GRPN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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