Groupon, Inc. (NASDAQ/GRPN) had better watch its back, according to my stock analysis.
The company’s business model of providing daily deals on goods and services is interesting, but it is not immune to the rising competition from rivals, since there are very few barriers preventing competitors from entering this area, based on my stock analysis.
My stock analysis tells me that the best companies in the world make goods or services that are either superior in nature or operate in an area for which there are extremely high costs to enter that limit the competition.
Unfortunately, my stock analysis is that Groupon was an early entrant in its business area, but numerous companies are surfacing that are pushing Groupon to defend itself by trying to offer the user an advantage. (Read “Why Playing Groupon’s Akin to Betting.”) I know in my case, I have made numerous purchases on Groupon (including a great deal on a hotel in Florida), but I’m now seeing amazing deals pop up on other web sites.
According to my stock analysis, Groupon not only faces competition from the likes of Yelp, Inc. (NYSE/YELP), Google Inc. (NASDAQ/GOOG), and Amazon.com, Inc. (NASDAQ/AMZN), but now it also faces competition from eBay Inc. (NASDAQ/EBAY). The online auction site recently launched a similar daily deal web site called “Lifestyle Deals” that is set to begin on November 3 and remain active for 45 days, offering heavy discounts on different products and services. (Source: “Lifestyle Deals” by eBay.) My stock analysis is that this move by eBay appears to be a trial run that will test the acceptance and focus on areas in California and Washington, DC. My stock analysis is that eBay, with its over 200 million users around the world, is looking at new areas to generate revenues in what has become a competitive online marketplace. (Source: “The Company,” eBay web site.)
eBay announced that it had just recorded its 100 millionth application download for its mobility business and is estimating mobile revenues of $10.0 billion in 2012. (Source: “Millions of Reasons eBay is Driving Global Commerce,” eBay web site.)
In my view, the major Internet companies are all looking at new areas of growth. The commonality is the massive user base that is available. Even troubled Facebook, Inc. (NASDAQ/FB), which just announced its one billionth member, has a significant resource to try to monetize its users and generate a massive amount of revenues, based on my stock analysis. CEO Mark Zuckerberg realizes this, and I remain intrigued by the company just because of its user base. My stock analysis is that if Facebook can monetize its users, I can see the stock moving much higher longer-term.
My stock analysis is that the companies that could have the edge in the Internet battle are Google, eBay, and Amazon. All three are established companies with excellent leadership and hundreds of millions of users. If the daily deal service by eBay works, it could really disrupt the business of Groupon, threatening its ability to survive, according to my stock analysis.
For the time being, I recommend sticking with the market-leading Internet-related stocks like Google, eBay, and Amazon, which also are key players in China. A long shot is Yahoo! Inc. (NASDAQ/YHOO), if CEO Marissa A. Mayer can somehow turn the company around and develop a sustainable business model.