Ever since Aubrey McClendon stepped down as CEO of Chesapeake Energy Corporation (NYSE:CHK) I have felt the malaise that late night talk show writers must have felt after George “Dubya” Bush and Bill Clinton stepped down. No more sure thing to skewer. And no more sure thing to bet on before the stock rises when they leave to “spend time with the family.”
CEO Mason is a little young to be pleading he needs to bond with the family, but shareholders would prefer a grownup in the room. Sure, it seems like Mason’s last summer gig maitre’d-ing at a trendy Japanese eatery is a king among the commoners deal but does it help improve Groupon as he says he was learning about the travails of small business? Or is it just the clown prince showing off? Or, worse, just goofing off? The beers during company meetings and accounting irregularities have not helped the image of Groupon as a serious publicly traded company, especially with a one year return of negative 70.61%. That’s just not funny.
Timing The Turnaround
His customers, the small business merchants, have been complaining for a long time about the lack of follow up and follow through from Groupon. They don’t want one-time looky loos who patronize them once never to be seen again. These merchants are just as likely to become the one time looky-loos of Groupon. They have plenty of alternatives like Living Social, backed by Amazon.com, Inc. (NASDAQ:AMZN) venture funding as well as Amazon Local Deals amid numerous other deal sites.
Groupon is finally trying to work out the disconnect between what merchants expect Groupon to do for business and what they actually get. To that end they bought Glassmap.com, a location sharing app for an undisclosed amount. What Glassmap will likely do is let Groupon know where you are, whom you’re with, and what you’re doing and then can localize and personalize deals to you.
Groupon Goods is another recent initiative meant to compete with eBay Inc (NASDAQ:EBAY) and Amazon offering deals on products instead of services. Just launched in NYC and Chicago the e-commerce offering will expand to many other cities.
To be fair, at the pivot point of Amazon’s success CEO Jeff Bezos was looked at askance as young and unfit for the position. His company’s business model was ridiculed but look at their success now… from a small online book business in 1994 to a $121 billion market cap global ecommerce dominator. As for eBay, it’s now a $73 billion market cap company since its humble beginnings in 1995 and the acquisition of PayPal has truly added value.
A Countdown For Mason
Mason only has one more quarter, tops, after this next release to really show the board (and shareholders) what he can accomplish. He may have to learn the hard way the most important facet of comedy, “Timing is everything.” Luckily for him Groupon has $1.2 billion in cash and no debt so he’s ahead of the game there.
In fact, Groupon’s doing better than deal competitor Amazon when it comes to valuation as its -$0.08 EPS on a five dollar and change share price is certainly better than Amazon with -$0.09 EPS on a $265 share price. And Groupon’s forward P/E of 23.82 is more heartening than Amazon’s at 73.84. Groupon has no debt and Amazon has $4.38 billion in debt to $11.45 billion in cash. While some pundits think Groupon could almost double to $10 in the next year few think Amazon could go to $500 in a year.
Also, a major hedge fund has been showing some conviction in Groupon. Tiger Global Management LLC has almost a 10% stake in Groupon worth over $300 million. Sterne Agee upgraded Groupon to a Buy on February 13 admitting they may be early but they like the push into e-commerce. Just hedging their bets, though, the analyst added this is an “out-of-consensus upgrade” and it was for a longer term timeframe.
Analysts are giving Groupon an estimate of 47.10% growth for next year and 26.56% annual growth rate for five years (yoy). eBay only has a 14.53% five year growth rate but it has the lowest forward P/E of these at 17.72. eBay is also close to 52 week highs and almost back to its all-time high from 2005.
The Punchline
If Mason can beat on earnings on February 27 he has a shot of staying in the show. If not he has only a few months left after that to prove there was method to his madcap-ness. Groupon is still very much a speculative stock even if it has risen over $5.00. It’s too early to tell if this e-commerce push is as promising as Sterne Agee thinks, so wait until after earnings to see the reactions as Groupon has a tendency to sell off afterward. I still like both eBay and Amazon as long term investments despite their maturity (relative to Groupon) and I wish for his shareholders’ sake Mason would quit kidding around.
The article Timing Is Everything originally appeared on Fool.com and is written by AnnaLisa Kraft.
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