News - Groupon makes profit but less than expected

[HEXUS]

Share value has a heavy tumble in Wall Street afterhours trading.

Read more.

[Zerox]

Right, as I am not particularly well-versed in economic theory, vould someone please explain this to me.

Groupon:

- $6.14 per share.
- Q2 revenue of $568 million, profit of $28.4 million.


Facebook:

- $21.60 per share
- Q2 revenue $1.18 billion Net loss of $157 million

My question is why are Facebooks shares worth more than 3x as much as Groupon's, despite making a substantial loss?

EDIT: source for Facebook figures

Revenue/Net income http://www.nytimes.com/2012/07/27/te...ectations.html
Stock price http://www.sfgate.com/business/artic...ds-3785608.php

[cheesemp]

How about offer some deals for a) Stuff that isn't fish pedicures, hair cuts etc which 90% seems to be b) Have real offers (Every product I've been interested in on groupon has proved cheaper elsewhere).

Can't help but feel groupon and the like is just a bit of a fad...

[semo]

Groupon is a fad. Any saving you can make on the retail price would be absorbed by groupon themselves. The offer providers usually get overwhelmed by interest and piss off most of the customers that sign up. Everybody loses while groupon skims off a little profit.

If they're lucky they'll end up like eBay. Popularity will dwindle and then things will settle down.

We all know that eBay is cheap because the stuff that's on there is dodgy, fake or broken. Soon everyone will know that groupon offers genuine spa experiences but you need to be prepared to be treated like garbage.

[Boris]

Right, as I am not particularly well-versed in economic theory, vould someone please explain this to me.

Groupon:

- $6.14 per share.
- Q2 revenue of $568 million, profit of $28.4 million.


Facebook:

- $21.60 per share
- Q2 revenue $1.18 billion Net loss of $157 million

My question is why are Facebooks shares worth more than 3x as much as Groupon's, despite making a substantial loss?

EDIT: source for Facebook figures

Revenue/Net income http://www.nytimes.com/2012/07/27/te...ectations.html
Stock price http://www.sfgate.com/business/artic...ds-3785608.php

Company valuations are not done on price per share. This is an arbitary amount when viewed in isolation from the number of shares in circulation.

Market capitalisation is the most basic way of comparing two companies and is the most common company attribute published in the non-specialist press.
Number of shares x price per share = market capitalisation.

In reality, market capitalisation is a snapshot of company size but cannot be used to assess the investment potential of a company, e.g. under or overweight.

One way of assessing a company's 'value' against its stock price is to generate a price to earnings forward multiple. The most basic of these would use the 'Market Price per Share'/'expected EPS', where EPS is 'earnings per share'. Earnings here would be defined as EBIT, 'earnings before interest and taxes'.

There are many other factors that would influence whether an investor would want to hold a share, e.g. dividend earnings, projected market share, sector growth (think Kodak) etc.

In the case of Groupon, investors/speculators raised the share price to value the company against a specific forward earnings multiple and that proved to be overly flattering. The price has therefore 'corrected'.
In the case of Facebook, there are doubts about its business model. Until investors see evidence that Facebook can transform its customer base into a predictable revenue stream it will be difficult to assess its value at all.

[Laserbeak]

I've grown to hate groupon too much spam and not enough useful offers