Maybe You Should Sell Your Groupon (GRPN) Now...

May 15, 2012 9:40 AM EDT
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Is Groupon (Nasdaq: GRPN) worth even a first look, much less a second or third look? Maybe not, according to several Wall Streeters.

The WSJ highlighted a belief Groupon is akin to a house of cards, ready to crumble with the slightest mishap. Or an increase in expenses.

For example, though the top-line number has grown over the last year, the company still didn't report a GAAP net profit due to cost of sales and staff expenses remaining at 50 percent of revs. Marketing expenses which have fallen from 50 percent of revs in the first quarter of 2011, fell to 21 percent in the recent period. However, Groupon doesn't see that number going much below 20 percent moving forward.

Cost of goods sold rose from 13 percent during the same quarter last year to 21 percent of revs.

Lower money set aside for marketing could also have a delayed impact, the WSJ pointed out. Second-quarter 2012 revs are only expected to increase by 2 percent.

With a 40 percent surge in the stock Tuesday morning, the WSJ cautioned the move higher may be premature, with insider lock-ups expected to be lifted on June 1st. That means 90 percent of outstanding shares will all of a sudden flood the event that could be worse if insiders decide to sell.

Shares are 25 percent higher Tuesday morning.

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