Groupon's 12-Day Losing Streak


If you think your stock can't catch a break, check out Groupon (NAS: GRPN) .

The daily-deals leader has fallen in 11 of the past 12 trading days. Oh, and the lone holdout in that time frame was actually when Groupon's stock closed unchanged on Wednesday of last week.

In other words, Groupon's stock has failed to move higher for a dozen consecutive trading sessions. The grim sum of all of those downticks is that the dot-com dud has surrendered 43% of its value in 12 market days.

It all started with a brutal quarterly report. Sure, revenue may have posted a year-over-year spike of 45%, but it was a different story sequentially. If you back out the company's direct revenue -- booked primarily through its new Groupon Goods merchandise push -- it generated 7% less revenue in the second quarter than it did during the first quarter.

The business model that made everyone so envious just a year ago is now a laughingstock. Groupon went public at $20 late last year, and it has gone on to shed half of its value -- twice.

However, was the company that went public as an overpriced $12 billion company finally a deal at $2.8 billion?

Many analysts don't seem to think the model is broken despite the sequential softness. Wall Street sees a profit of $0.18 a share this year, more than doubling to $0.37 a share next year. If Groupon is able to get back on the growth track, it would seem to be cheap at a 2013 earnings multiple in the pre-teens. The stock's market cap is essentially the same as the $2.83 billion in revenue that Wall Street sees the company generating next year.

It gets better. A rare benefit of being a busted IPO is that Groupon was able to raise a lot of money late last year at a high price. The result is that Groupon closed out its June quarter with nearly $1.2 billion in cash, and that's more than enough to wipe away the current liabilities on the company's balance sheet.

Groupon's going to have to win back Mr. Market's respect, naturally.

It won't be easy. Even its smaller peers and imitators are trying to distance themselves from the equity meltdown that Groupon has become. LivingSocial -- Groupon's closest rival, backed by (NAS: AMZN) with a 29% stake in the company -- is trying to differentiate its offerings by selling vouchers to proprietary festivals and classes. Travelzoo (NAS: TZOO) is leveraging its existing subscriber base and targeting higher-caliber deals than Groupon's discounted outings.

Contrarians have to like what they see here. Groupon was overvalued when everybody wanted to be the company. What does it say about the stock's value now that everyone's trying to get away?

If you think the Groupon model has legs, there has never been a better time to buy.

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