Groupon primed for a comeback?
The struggling daily-deals site sees shares soar after releasing a better-than-expected earnings report.
Groupon (GRPN) reported this week that revenue jumped by 89% from a year earlier, a better-than-expected result that surprised investors and sent the daily-deals site's shares up by 16%.
Groupon's stock had been declining ever since it launched its IPO in November, as investors soured on the company's poor earnings results and shady accounting corrections. Groupon was subsequently held up as the poster child for a burgeoning tech bubble, as over-exuberant investors had valued the company at close to $18 billion on its IPO -- a figure that soon fell as low as $6 billion, though it's since clambered back to $8 billion.
Is Groupon about to come roaring back?
Yes. Groupon is improving its business model: Groupon not only bulked up on revenue and expanded its customer base -- it also brought down its marketing costs, says Rolfe Winkler at The Wall Street Journal. The company's harshest critics have "argued that its business model would collapse when it dialed down marketing expenses," saying the site was too dependent on advertising "to promote its daily deals." But now it looks like Groupon can grow and spend less.
But Groupon still faces challenges: Groupon still didn't post a profit, and it's not clear when it might do so, says Sandra Guy at The Chicago Sun-Times. The company's accounting practices remain a source of distrust, and Groupon hasn't really cracked the smartphone market yet. Furthermore, customers could become tired of "getting bombarded with daily email deal offers," and Groupon is facing "significant competition from would-be copycats."
And the stock is about to plunge: Groupon "has a major problem looming right up ahead," says Joan Lappin at Forbes. Groupon's pre-IPO shareholders have long been prevented from unloading their stock. But that will change June 1, when 95% of Groupon's shares will go on the market -- that's right, only 5% of shares are publicly traded today. "Whether those shares will come out in a torrent or a trickle… remains to be seen." But either way, the market will become awash with Groupon shares, supply will exceed demand, and many investors will be looking to unload Groupon stock.
Best Opinion: Wall Street Journal, Chicago Sun-Times, Forbes
More from The Week
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.