Following a disappointing fourth quarter earnings report and the beating it took on Wall St. this week, many are asking the question: is Groupon all it's cracked up to be?
The social coupon company was hammered in after-hours trading on Wednesday after it announced a loss of almost $43 billion in the last quarter, and its stock fell nearly 14 percent on Thursday.
Montely Fool columnist Rick Munarriz made the case yesterday that Groupon's glory days are behind it, citing strong competition by copycat site LivingSocial and newer, even more nimble rivals, and decisions by potential competitors like Yelp and OpenTable to exit the market.
Munarriz also takes on Groupon's supposed 50 percent cut of all coupons, citing the fact that gross billings grew faster than revenue as evidence that the company is lowering its take to around 40 percent. This also went noticed by Forbes' Teflis Team blog, who pointed out that Groupon's take rate—the ratio of net revenues to gross billings—fell from 42 percent in 2010 to about 40.5 percent last year, and said that they expected the take rate to continue to slide.
Over at Business Insider, however, CEO Henry Blodget had a different take on the earnings report, comparing naysayers to those who doubted Amazon's business strategy back in the 1990s. As for the online coupon company's negative net income, Blodget writes that this was based on a one-time international tax bill, writing that Groupon's business is now profitable. Even Blodget, however, believes the stock is overvalued, though he has faith in the company itself to continue to grow and turn profits.
International sales were a bright spot in the company's earnings report, tripling year on year to reach $318 million in the fourth quarter. But even outside of its North American home market, some are doubting the company's ability to succeed abroad. The Drum, a UK-based media blog, Andrew Girdwood noted that Groupon has been cited many times by the Advertising Standards Authority for misleading advertisements, and is having technical issues reaching Edinburgh-based subscribers who are using Gmail addresses.
Groupon finished Friday down about a quarter, or a bit over 1 percent, as investors approach the stock, which was once a darling of Wall Street, with more skepticism and caution.