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Groupon (GRPN) May Attract Interest, But Not From Daily Deals (GOOG) (FB)

December 11, 2012 11:38 AM EST
Groupon (Nasdaq: GRPN) shares are ticking higher again Tuesday following another go by Bloomberg at its M&A potential. Those on the stock might remember Groupon's 23 percent rise last Friday on chatter.

Today, Bloomberg is taking the other side of the aisle, saying Groupon is still expensive, even with a market cap that is half of what Google (Nasdaq: GOOG) offered to the company in 2010.

Analysts see sales growth at Groupon slowing to a trickle over the next few years, dropping from 45 percent in 2012 down to 0.6 percent by 2015. Groupon's diversification efforts, like opening Groupon Goods, a retail segment, might actually deter potential buyers like Yahoo! (Nasdaq: YHOO) and Microsoft (Nasdaq: MSFT), two giants that haven't yet dove into that sort of operation.

One B. Riley analyst mulled the question: what would someone see in Groupon that would coerce them to buy the company? Its customer base is buying less, there's no technology to fall back on, and the sales force is dwindling, the analyst commented.

Other than growth sentiment, Groupon hit a snag earlier this year when it disclosed "material weakness" with its internal controls.

But, not all is lost. Another analyst says that if Groupon can show strong competition in the retail segment against major players like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY), it might change investor sentiment. Groupon Goods rose 20-fold to $145 million in the most recent quarter, while its daily deals segment slipped 1.2 percent to $417 million.

That growth won't trick the likes of Google. The search giant tried to launch its own sales segment with Google Offers, reaching muted success in the process. Google, with about $46 billion in cash and equivalents, could easily afford the $3 billion market cap of Groupon, but the question then becomes of whether or not it could spend a similar amount of money and have stronger internal growth that would match what Groupon has out there? In most cases, the answer is "yes."

Facebook (Nasdaq: FB) might take a hard look at Groupon given its recent efforts to monetize its some one billion in users. Recently, Facebook launched Facebook Gifts, which allows friends to send actual items to others via the Facebook system.

Whatever the case, those who have suffered through the 79 percent drop in value since Groupon's IPO last year would expect some sort of kickback. And they don't need to be sold on that notion.

Shares of Groupon are up 3 percent Tuesday.


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