Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Short-Term Investors: Groupon Inc. Isn't for You

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

It's rarely been easy for Groupon (NASDAQ: GRPN  ) or its shareholders since going public about two and a half years ago. Even before Groupon became a publically traded company, the first of what would be several accounting questions and irregularities arose. Analysts lambasted the antics of former Groupon CEO and co-founder Andrew Mason, and were less than enamored with its easily copied business model.

Despite its inauspicious beginnings and the eventual ouster of Mason, Groupon is slowly but surely reinventing itself into a multidimensional e-tailer, while still dominating its original deals market. Groupon CEO Eric Lefkofsky is making a lot more right moves than wrong, including the recent decision to ramp up its marketing efforts for the first time in three years. The reaction? Groupon's stock price closed down nearly 2% yesterday following Lefkofsky's announcement.

Some background
If there were any questions about Mason's tenure at Groupon, they were emphatically answered both by Mason himself after getting the boot as CEO, and investors following the news. Mason's response to being ousted?

I've decided that I'd like to spend more time with my family. Just kidding -- I was fired today. If you're wondering why ... you haven't been paying attention.

Obviously, Mason was not engaged in the process of turning Groupon's fortunes around.

Investors also made it clear what they thought about Mason's departure in late February of last year. The next day, investors drove Groupon's stock price up nearly 13%, effectively saying, "good riddance." Unfortunately, Lefkofsky and the Groupon team still can't seem to win over analysts or investors, despite successfully implementing much-needed changes.

The man with a plan
When Groupon co-founder Lefkofsky took the permanent CEO position last August, one of his first orders of business was to ramp-up non-coupon revenues. Those analysts that blasted Groupon early on were right about one thing: Groupon's online deals are easily copied, and there were -- and still are -- some serious players.'s (NASDAQ: AMZN  ) LivingSocial and Google Offers are the biggest, but they're hardly alone.

Thankfully, Lefkofsky was already on board with the notion that Groupon needed to expand beyond deals and develop multiple revenue streams. The biggest, and the most scrutinized of Groupon's growth efforts, is its Goods unit. Once again, short-sighted investors lamented the decision to build out its e-commerce operations, citing concerns about margins.

Groupon's overseas sales got a jump-start when Lefkofsky spent $260 million to acquire Ticket Monster from financially strapped LivingSocial. Groupon also acquired online fashion retailer Ideeli for $43 million, instantly expanding its online retail presence. Long-term, both acquisitions are perfectly suited for Groupon's growth aspirations.

More recently, Groupon announced it was returning to TV with a new ad campaign to support its efforts to become a full-fledged e-commerce site. The result was a nearly 2% drop in share price to close out the week. Why? Because Lefkofsky let the cat out of the bag: When you increase overhead to drive long-term growth, a negative impact on the bottom line will follow.

Lefkofsky isn't the only one who recognizes the need to diversify Groupon's offerings. After a tough 2013, Amazon is still waiting to get some kind of return on its LivingSocial investment. According to CEO Tim O'Shaughnessy, LivingSocial is going to turn its fortunes around by expanding beyond online deals to generate alternative sources of revenue. And the $260 million from Groupon for Ticket Monster? O'Shaughnessy intends to invest the money to grow LivingSocial's online offerings -- a plan that Groupon initiated over two years ago.

Final Foolish thoughts
Groupon is a perfect example of short-term investors who drive the share price for a long-term growth stock. Lefkofsky is spot-on in his efforts to move beyond daily deals, ramp up marketing, and integrate its new acquisitions. These are the steps that build long-term value for shareholders, even though many investors seem intent on focusing on Groupon's next week, instead of next year.

6 more stock picks poised for long-term growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Read/Post Comments (2) | Recommend This Article (6)

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 April 07, 2014, at 1:30 PM, Lindco1 wrote:

    HAHAHAHAHA - you're blamming Mason????? Hilarious!!!

    This company no LONG TERM value!!! Hello?? Groupon WILL be gone in 3 years or


    Lefkofsky is clueless!!! The books are cooked will ANOTHER accounting discrepency is coming shortly.

    This company is ONLY designed to make Lefkofsky rich and no one else.

    WHY Groupon is NOT a good investment short or long term....

    1. Amazon will CRUSH them

    2. Tooo many employees - 11,000????

    3. No/low margins

    4. WAYYYYYY too much cost to do business

    5. They keep buying Lefkofsky companies - HELLO???

    6. Groupon is designed for ALL Lefkofsky companies to make money off of Groupon! Hello???? Scam

    Do NOT even campare Poop-on with Amazon!!!

    Obviously you're long in Groupon. We understand. But QUIT LYING!!!

  • Report this Comment On April 16, 2014, at 3:48 PM, 1492 wrote:

    Thank you for this insightful analysis!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2904450, ~/Articles/ArticleHandler.aspx, 9/3/2015 12:54:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

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.

Today's Market

updated 3 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 3:59 PM
GRPN $4.35 Up +0.06 +1.40%
Groupon, Inc. CAPS Rating: *
AMZN $510.55 Up +14.01 +2.82% CAPS Rating: ***