Groupon (NASDAQ:GRPN) is diving into the seemingly crowded food-delivery market, and no one seems to care. Thursday's official debut of Groupon To Go, offering hungry patrons in its home base of Chicago access to takeout and delivery from more than 500 participating eateries, didn't get the market's tummy rumbling. Shares of Groupon actually inched lower on the day, trading at one point within a dime of the stock's 52-week low.
Now, there are two good reasons for Mr. Market to yawn at the development. The first reason for the ho-hum reaction is that Groupon's been piloting this program since March. The official launch isn't going to make jaws drop. The second reason for the bout with blase is that two weeks earlier, Groupon acquired OrderUp, an on-demand online and mobile food ordering and delivery platform with a presence in 40 markets.
In short, Thursday's news wasn't exactly news. It still doesn't mean this isn't a spectacular move for a company that's fallen out of favor lately.
Groupon investors have experienced some pretty severe ups and downs. It's been a wild ride since the company went public at $20 in late 2011. After a few weeks of initial euphoria, Groupon became, and remains, a busted IPO. It currently trades for less than a quarter of its IPO price.
But it hasn't always been a downhill ride for investors. The stock soared 142% in 2013, poking its head back into the double digits. That was the year the company gave its founding CEO the boot, experienced a spike in North American bookings, and cranked out consistent adjusted profitability.
Growth has stalled, and since a lot of that stateside growth in 2013 came from the addition of selling physical goods -- something that boosted revenue at the expense of gnawing on margins -- the market hasn't been very impressed with Groupon as an investment since peaking in the pre-teens early last year.
It needs a new catalyst, and that's where Groupon To Go could fit the bill. Groupon referred to the $70 billion food ordering and delivery sector, and the ability to push takeout and delivery to its 25 million active customers in North America. This is a crowded market, with companies including Seamless, PostMates, and potentially even Uber making a play in this niche. However, Groupon is hoping to stand out by offering at least 10% off on orders. We know it won't have a problem finding restaurants willing to offer markdowns to gain new customers. That's what its flagship group-buying business is all about. As Groupon To Go expands -- it plans to roll out in Boston and Austin later this year -- it will benefit from its huge base of established deal seekers and its novel approach to marking down deliveries and takeout orders.
The market isn't paying attention, but Groupon To Go could be a difference maker for a company that needs one in a bad way.