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Groupon Inc. or It’s Not Even Close

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When online discounter (NYSE: COUP  ) went public last week, it nearly doubled its IPO price of $16 per share in its first day of trading. At the same time, Groupon (NASDAQ: GRPN  ) was just a week removed from getting lambasted after announcing "disappointing" earnings. Though the two online deals companies have slightly different business models, they play in the same sandbox.

It's natural for investors to compare and Groupon to determine which, if either, would make the better investment. Despite Groupon's recent stock price beating,, by almost any measure, doesn't belong in the same ballpark. Yet has won the hearts and dollars of investors, while Groupon continues to languish.

A look at opened its figurative doors in 1998, nearly 10 years before Groupon began offering its online deals. With more than 700 companies and 2,000 brands in's arsenal, consumers can download its coupons and save on a variety of products.

While Groupon works with its merchandisers to offer bulk coupons for its deals, partners with its retail clients using a platform that allows customers to print and redeem coupons. The beauty of the deal for is that it makes money with each printed coupon, whether or not a consumer actually uses the coupon. Revenue is also generated by selling advertising on the website.

In its most recent quarter, reported revenue of $52.6 million, a nearly 50% jump from $35.79 million in the fourth quarter of 2012. On an annual basis, also generated about 50% higher revenue last year compared to 2012. While small, the revenue is certainly trending in the right direction, as you'd expect for a newly traded company.

The problems lie in's net income results and its prospects for becoming profitable anytime soon. Though it saw improvement, lost more than $11 million in 2013; it doesn't expect to become profitable for a few years due to costs associated with expanding into new markets, planned increases in research and development, and sales expenses.

Advantage, Groupon
The story becomes a little hard to digest when you compare its financials, number of users, and business model with Groupon. After reporting a solid fourth quarter and 2013 last month, Groupon's stock price dropped nearly 20% and hasn't recovered much since. Many analysts cited Groupon CEO Eric Lefkofsky's projection of lower than expected earnings this quarter due to costs associated with the recent acquisitions of Ticket Monster and Ideeli.

Analysts choosing to not factor in the costs of assimilating acquisitions makes little to no sense, but it's the financial comparisons between and Groupon that are really mind-boggling. As it stands today, is trading at 11.68 times annual revenue, compared to Groupon's 2.18 trading number. Groupon has a whopping $1.2 billion in cash and equivalents, compared to's $39 million.

Groupon also has multiple lines of revenue, expanding beyond the highly competitive online deals business with its extremely successful Goods unit. In the company's most recent earnings announcement, Lefkofsky credited Goods for driving Groupon's record-breaking results. Just as with an investment portfolio, diversifying revenue streams is a sound business decision, and one Groupon is executing. The shift to mobile is also on track, with nearly half of Groupon's holiday season transactions completed on the go.

Final Foolish thoughts
Groupon is also head and shoulders above when it comes to user numbers. Its 44.9 million users, geographically diversified around the globe, dwarf's 17 million. Yet remains the darling of the investment community, while Groupon is scorned. No, this doesn't make sense, but Groupon is a great opportunity for investors in search of value.

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Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 17, 2014, at 10:45 AM, Lindco1 wrote:

    Hahahhaha Groupon????? You mean the company that is trying to compete with Amazon because the "daily deals" are dying???

    The company with freaking 11,000 employees???

    Razor thin margins, returns.

    Cost of doing business is tooooo expensive at Groupon!!!

    You guys must stuck long in Groupon.

  • Report this Comment On March 17, 2014, at 11:18 PM, Burstedbladder wrote:

    I don't like either. Groupon is just a scam and not all places they claim to have great prices are exactly accurate, and as for internet coupon, all they want to do is force you to install their printer software filled with mallware and all this other kr@pVVare on your computer. Also, most stores do not accept these printed put coupons from your home.

    I'd rather get the Sunday paper and clip the coupons rather than waste tome on the internet wasting my ink and paper on coupons on;y to have a store tell me they do not accept them.

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Tim Brugger

Tim has been writing professionally for several years after spending 18 years (Whew! Was it that long?)in both the retail and institutional side of the financial services industry. Tim resides in Portland, Oregon with his three children and the family dog.

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Related Tickers

9/4/2015 4:01 PM
COUP $9.20 Down -0.21 -2.23%
GRPN $4.25 Down -0.04 -0.93%
Groupon, Inc. CAPS Rating: *