In just over two months, Groupon, Inc. (NASDAQ/GRPN) has more than doubled in value from its 52-week low of $2.60 on November 12, 2012. The company’s business model of providing daily deals on goods and services is interesting; but it’s not immune to the rising competition from rivals, since the barriers to entry are relatively low, based on my stock analysis. Unfortunately, my stock analysis suggests that Groupon was an early entrant in its business market, but numerous companies are now surfacing, pushing Groupon to defend itself and try to offer an advantage for the user. (Read “Playing Groupon is Akin to Betting.”) I know that 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 popping up on other web sites.
Groupon’s stock chart below shows a possible upside break at the $5.50 resistance line, marked by a bullish ascending triangle, based on my technical analysis.
Chart courtesy of www.StockCharts.com
My stock analysis indicates that Groupon doesn’t only face competition from the likes of Yelp, Inc. (NYSE/YELP). Google Inc. (NASDAQ/GOOG), and Amazon.com, Inc. (NASDAQ/AMZN); it now faces competition from eBay Inc. (NASDAQ/EBAY), which launched a similar daily deal site called “Lifestyle Deals” that offers heavy discounts on different products and services. My stock analysis notes that this move by eBay is a trial run to test the acceptance of users, and it will focus on areas in California and Washington, DC. My stock analysis suggests that eBay, with its more than 200 million users worldwide, is looking at new areas to generate revenues in what has become a competitive online marketplace. (Source: “The Company: Background,” eBay web site, last accessed January 30, 2013.)
In September, eBay announced that it had just recorded its 100-millionth application download for its mobility business, and it estimated mobile revenues of $10.0 billion in 2012. (Source: “Millions of Reasons eBay is Driving Global Commerce—Anytime, Anywhere,” eBay web site, September 24, 2012, last accessed January 30, 2013.)
In my view, the major Internet companies are all looking at new areas of growth. The commonality amongst them is the massive user base that’s available. Even Facebook, Inc. (NASDAQ/FB) is hot on its chart, as it eyes its $38.00 initial public offering (IPO) price.
Chart courtesy of www.StockCharts.com
The strength of Facebook is its user base of more than one billion members, which is a significant resource to try to monetize to generate a massive amount of revenues, based on my stock analysis. CEO Mark Zuckerberg realizes this. I remain intrigued by the company simply because of its user base. My stock analysis suggests that if Facebook can monetize its users, the stock will move much higher longer-term.
My stock analysis indicates that the companies that could have the upper hand in the Internet battle are Google, eBay, and Amazon.com. 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 and threaten its ability to survive, according to my stock analysis.
For the time being, I recommend sticking with the market-leading Internet-related stocks: Google, eBay, and Amazon.com. These stocks are also key players in China. A long shot is Yahoo! Inc. (NASDAQ/YHOO), which under CEO Marissa A. Mayer just reported an excellent quarter. I also like LinkedIn Corporation (NASDAQ/LNDK) in the professional social networking space.
Note: none of the stocks mentioned should be construed as a buy recommendation; they are simply used for illustrative purposes.
Look Out Groupon: eBay’s Upping Its Game was last modified: March 11th, 2013 by George Leong, B.Comm.
George Leong is a senior editor at Lombardi Financial. He has been involved in analyzing the stock markets for two decades, employing both fundamental and technical analysis. His overall market timing and trading knowledge are extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi Financial’s popular financial newsletters, including Red-Hot Small-Caps, Lombardi’s Special Situations, Judgment Day Profit Letter, Pennies to Millions, and 100% Letter. He is also the editor-in-chief of a... Read Full Bio »
Forecasts Aug. 31, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 31, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)