1-Star Stocks Poised to Plunge: Groupon?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, daily deal specialist Groupon (Nasdaq: GRPN  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Groupon's business and see what CAPS investors are saying about the stock right now.

Groupon facts

Headquarters (founded)

Chicago (2008)

Market Cap

$3.5 billion

Industry

Internet retail

Trailing-12-Month Revenue

$2.1 billion

Management

Co-founder/Chairman Eric Lefkofsky
Co-founder/CEO Andrew Mason

Trailing-12-Month Return on Equity

(12.4%)

Cash/Debt

$1.2 billion / $0

Competitors

Facebook (Nasdaq: FB  )
Google (Nasdaq: GOOG  )
LivingSocial

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 84% of the 805 members who have rated Groupon believe the stock will underperform the S&P 500 going forward.

Earlier this week, one of those Fools, btmn, succinctly summed up the bear case for our community:

Groupon has a product whose innate value is questionable, a subscriber base experiencing fatigue, a cost structure that is unsustainable, a management team that doesn't instill confidence, and a brand that is becoming synonymous with over-hyped IPOs. All this baggage will be a drag on the company's ability to attract talent (the lifeblood of a tech company) and investors (who ultimately set the price of the company's stock). Even if the company manages to come up with a new strategy that has the potential for profits, it's doubtful that (1) they'll be capable of execution or (2) that the market will have enough patience to let them pivot in a meaningful way.

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Brian Pacampara has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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