by Michael Tarsala
When investment manager Barry Randall said Groupon was a $5 stock, little did he know it would drop another 33% to reach that price in just a matter of weeks.
Back in July, Randall detailed his accounting concerns about the online deals marketer and said its shares should trade at $5, a price-to-revenue discount to more established marketing peers such as Nielsen (NLSN) and Arbitron (ARB).
Even though the stock has now dropped to his fair price on a recent string of poor news, Randall says that he still will not but it.
“Groupon is comedy gold; it’s the gift that keeps on giving,” he said. “Every time you turn around, there’s another fascinating train wreck.”
The latest was disappointing second-quarter results reported last week, and its slowest customer base growth ever. Groupon shares declined 27% on the news.
Concerns are now being raised about Groupon’s business model, whether the company is delivering value for it small-business customers, and prompting news headlines including, “Ding Dong, Daily Deals Are Dead.”
The company’s biggest concern of all, Randall says, is its first-ever quarter-to-quarter decline in gross billings – a measure of how much money Groupon is collecting from its customers, and a potential harbinger of future revenue.
“It means the core Groupon business is now shrinking,” he says. “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.”
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