Ticker: GRPN ($4.35 1.4%)

  • Groupon’s e-mail/push marketing is less effective due to spam filtering in e-mail clients.
  • Groupon’s management team focuses on short-term value creation, which diminishes long-term growth assumption, and reduces confidence in the company’s strategic positioning.
  • Competition in the e-commerce space has stiffened and has put Groupon in a position where it will be difficult to grow.
  • Groupon isn’t cheap enough to attract legitimate value investors.
  • Overall, investors should avoid Groupon.
  • Groupon Stock Is a sell

    Groupon (GRPN) has experienced a bit of a rally in the past couple days, but I honestly believe that investors would be very poorly positioned to own the stock given the deceleration in audience metrics, and the inability to increase take rates on any transactions via its daily deal site.

    Note: You might be interested in my earlier Groupon Stock Valuation Video.

    Groupon’s strategy of sending out daily emails on deals has proven to be ineffective over time, as email service providers are screening for spam, and in the case of Gmail, Groupon e-mails are sent immediately to the promotions tab, which is another way of saying, the “spam folder.” The average email user does not pay any attention to the spam folder, and while Gmail is not the only email client provider, Gmail holds 16% email client market share according to Litmus email analytics. Therefore, strategically Groupon is poorly positioned. Furthermore, broader industry trends have shown that email will become less effective at sustaining ongoing relationships with customers.

    Therefore, Groupon’s strategy to combat this was to transition the website so that it had pull, rather than push marketing. Initially the active user growth on the application was strong, which correspondingly drove a lot of speculation around the Groupon stock. However, efforts pertaining to mobile are starting to slow based on recent statistics. Furthermore, the company’s board and executive team have demonstrated a track record of short-term decision-making.

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