Here’s an interesting phenomenon—Internet stocks are either shooting through the roof or dropping to the floor. Unfortunately, Groupon Inc (NASDAQ:GRPN) stock has fallen into the latter category for the most part since it went public. At $4.19 a share, Groupon stock has plunged 46.4% in the past 12 months and is down more than 80% since its initial public offering (IPO). Is the stock still worth looking at?
The answer is yes. Here’s why.
Growth in North America
As a company that needs to connect with local businesses, Groupon has done a decent job in many countries around the world. But what it really shines at is growth in its home turf—North America.
Gross billings reflect the total value of customer purchases on goods and services. In North America, gross billings came in at $1.05 billion in the fourth quarter of 2015. Excluding the impact from changes in foreign exchange rates, that would be an 11% increase year-over-year. (Source: “Groupon Announces Fourth Quarter and Fiscal Year 2015 Results,” Groupon Inc, February 11, 2016.)
Monetization also improved. In the same period, Groupon’s revenue from North America came in at $623 million. On a FX-neutral basis, that’s a 13% increase compared to the fourth quarter of 2014.
Note that North America is Groupon’s largest segment in terms of both gross billings and revenue. If performance in the region keeps going strong, it could be a huge catalyst for GRPN stock.
If you have been paying any attention to Groupon stock at all, you would have heard the news. On the day that Alibaba Group Holding Ltd (NYSE:BABA) disclosed its 5.6% stake in the company, GRPN stock skyrocketed 41.2%. That marked Gourpon’s biggest one-day gain since its IPO. (Source: “Groupon Soars Again, This Time After Alibaba’s 5.6% Stake,” Bloomberg, February 16, 2016.)
Alibaba said it won’t be an activist investor. However, the Chinese e-commerce giant did make it clear that it’s prepared to share experience with Groupon. And when it comes to the group-buying business, Groupon might be able to learn something from Alibaba.
You see, Alibaba is behind the largest online-to-offline (O2O) company in China—Meituan-Dianping. The company brings consumers from its online app to physical stores. To understand how big of a market Meituan has, here’s a number for you: in 2015, the market size for China’s restaurant bookings, movie-ticket purchases, and food deliveries is about six trillion yuan (US$920 billion). (Source: “China’s Big Web Deal: Five Key Numbers for Meituan, Dianping,” Bloomberg, October 8, 2015; http://www.bloomberg.com/news/articles/2015-10-08/china-s-big-web-deal-five-key-numbers-for-meituan-dianping.)
Going forward, Groupon has to work on two things: having more deals on its platform and letting more consumers know about those deals. With Alibaba’s experience in the O2O business, Groupon might be able to come up with some new strategies.
The Bottom Line on GRPN Stock
Of course, Groupon still has many issues to address before more investors are willing to jump on board. But the company is not over. It would be interesting to see how Groupon can improve itself in the upcoming quarters and what that would do to GRPN stock.