Is Groupon Set For Great Growth?
Despite being constantly crushed under the weight of naysayers, Groupon (NASDAQ:GRPN) has managed to maintain positive sentiment among a section of growth-oriented investors. There is strong investor confidence in its promise of future growth. This confidence is not inspired by sympathy, but rather a deep understanding of the company’s underlying strategy.
Underlying Strategy Strengthens Key Support Pillars
Most internet companies usually get absorbed in the typical bullishness that comes with tech stocks to the point that they forget to establish a soft landing that protects them if and when the bubble bursts. Groupon is however not falling into this trap. It’s international and mobile strategy not only serve as strong support pillars, but also present a soft landing in case things go south.
To digress a bit for the sake of context, Groupon’s international revenue decreased 15 percent year-on-year in the third quarter, beating its own estimate of a 17% decline. The ecommerce bigwig, which is still treading in the red, however, has a solution for its wavering international business.
Groupon recently announced its $260 million acquisition of Ticket Monster, a Korean ecommerce company owned by Living Social Inc. The deal, which is expected to close in the first half of 2014, will see Groupon pay $100 million in cash and $120 million in Class A common stock.
The Ticket Monster acquisition announcement, which coincided with Groupon’s third quarter earnings report, signaled the company’s appetite for the lucrative Asian market and more importantly, its international strategy. Ticket Monster, which is locally known as TMON, has seen its billing grow consistently at a rate above 50 percent since its inception in 2010. Its current annual billings are estimated at $800 million. Groupon can leverage TMON’s clout to penetrate Asia as well as to broaden its support base for international business.
As far as mobile goes, Groupon is gaining notable traction. In September, Groupon’s push into mobile saw its tipping point. More than half of all the company’s US transactions were completed through mobile devices during the month. Globally, mobile devices accounted for more than 40 percent of transactions. In addition, 9 million Groupon apps were downloaded in the third quarter; bringing total downloads to 60 million. Incidentally, close to half of TMON’s sales are transacted on mobile. This admittedly sets the stage for great synergies between TMON and Groupon.
Corporate Communications Icing On The Cake
Groupon’s management also knows how to handle corporate communications in a fashion that serves shareholders’ interest. It is no coincidence that all through the year, the ecommerce bigwig’s major announcements have concurred with earnings reports. In the first quarter’s earnings release date, it announced the dismissal of then CEO and founder Andrew Mason who, as Wall Street Insanity reported, later took a detour into the music industry. The second quarter’s earnings report likewise coincided with the announcement to appoint current CEO Eric Lefkosky as permanent CEO. In the past quarter, it announced the TMON acquisition.
This trend signals Groupon’s efforts to offset the damage brought by bears’ constant reminder about the unmoving bottom line. Through tactful communication, Groupon protects its share price and in effect, investors on the stock market. Groupon is a good buy.
Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.