Groupon Inc (NASDAQ:GRPN) shares are at $4.57 today, down almost 9 percent, and reeling from a downgrade by Evercore Partners Inc. (NYSE:EVR) on concerns of a likely decline in billings.
According to Ken Sena, analyst at Evercore Partners Inc. (NYSE:EVR), “We see potential for future cash burn, assuming billing declines persist, as the deteriorating impact of ‘changes in accounts payable’ could be enough to offset growth in income earned.” Sena cut the price target for Groupon Inc (NASDAQ:GRPN) from $6.50 to $3, and cut its rating to Underweight.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
In a rewind to its Q2 results, which really gave an impetus to Groupon’s downhill run in the markets, the company reported its first q-on-q decline in gross billings, an important metric for the daily deals site. At the time, investment manager Barry Randall expressed his apprehensions, “the core Groupon business is now shrinking. The company would be approaching a fair price if it were stabilizing, but that is not the case. So while it ought to trade at two times revenue, or about $5 a share, at this point it deserves to trade at a discount.”
Does Groupon Inc (NASDAQ:GRPN) really deserve all the bad news it’s getting?
It may be worthwhile to look at a very interesting video interview of Groupon CEO Andrew Mason, which was conducted by Kara Swisher, and to view the situation from his side of the table. We present below some of the most important comments made by Mason in this wide-ranging interview.
On whether the IPO was a bad decision, more so considering the opposition expressed by Howard Schultz and outside investors.
Mason’s view was that a company of Groupon’s size would have had to go for an IPO sometime anyway – better then than never. He did point out however, that the board took a considered decision that ultimately, everybody did sign off on.
On Wall Street’s reaction to the Q2 results
Mason clarified that the markets had focused unduly on a quarter-on-quarter performance – he felt it was more appropriate in the case of a company such as Groupon to view the results on a y-on-y basis, and here Groupon Inc (NASDAQ:GRPN) had done exceedingly well – showing a 45 percent growth.
Another point he made rather well – even Amazon.com, Inc. (NASDAQ:AMZN) has a couple of quarters every year that are lack-luster on a q-on-q comparison.
On employees leaving
He said employee attrition at Groupon was much lower than at other companies, and even this low level was nothing abnormal by Groupon standards.
On Groupon’s key achievements
Exceptional transition to mobile. Groupon Goods, a new business, which reached scale in what must be a record for the industry. A presence across the globe, with market leadership in most countries.
On whether he would change his persona
Primarily Europe – he would have liked to install the technology that was the basis for Groupon’s success in the U.S.A in Europe much sooner.
On the fall in Groupon’s shares
Groupon really does not watch or intervene in the stock and its pricing. The focus of the company is, instead, on its customers and business.