I wouldn't be too surprised to see Facebook stock head down the same path. If Facebook was trading at the same P/E ratio as Google, the stock would be worth $8 a share.
At least it's an extra data point to show we're not in a startup bubble. If we were, these stocks would be skyrocketing no matter how bad the company was doing.
In fact, how bad they are doing would be an asset-- "We're running as big a loss as we can so we can grow as fast as we can!" -- I think Amazon is still using that line. (though they are growing fast.)
They're not operating at a loss, so I'm not sure how they're using that line.
I totally see your point (and agree) but there's an important distinction to make in Amazon's case, because there's a big difference between aggressively re-investing your profits into growth and aggressively burning other people's money to grow.
Facebook and GroupOn are too small a sample size to draw this conclusion.
Have you accounted for general market trends? Seasonal cycles? Comparisons to other IPOs? Contrast with other types of companies that aren't part of your perceived bubble?
AAPL can generally be bought for under a 14 PE these days. An equivalent FB price would be $4.37. FB profit growth over the next decade may be much bigger than Apple's, but I have a lot more uncertainty about what it will be, so its hard to estimate a fair PE. Meanwhile there are Apple shares on sale every day that give me a rock bottom PE for a company with very persistent and fast growing profits.
PE isn't everthing but I wish the press would talk more in terms of comparable valuations than the stock dollar price which doesn't really tell you much.
FB is already headed down this path. Today (6/4/12) is the 11th trading session for FB, and the stock is down ~ 27% from it's IPO price. That's an averaged ~2% decline per day. Get ready for a fun ride DOOWWWWWNNN!
Maybe it's my limited understanding of finance, but I have trouble understanding why people thought it was a good idea to invest in a coupon company in the first place.
Honestly, it has little to do with finance, and much to do with hype. It's not about fundamentals. It's about what the stock will be trading at in a month. If there was a track record of dog crap selling for twice its value every week, you would be stupid not to buy, right?! Sometimes there's just a bubble of one.
There's growth investing, and there's pure speculation (which may or may not involve growth companies.) He seems to be talking about the latter - buying in the hope of a "greater fool". Growth investing is based upon the idea that the purchased business will grow and the stock price will rise over time as a result.
An IPO is a sale of stock. When selling any product there may be a guaranteed audience (e.g.: institutional investors) but groupon (and Facebook) both have the advantage that millions of regular consumers are aware of them.
Thus, the average mom in illinois is far more likely to buy Groupon or FB than JDS-Uniphase or Applied Materials.
I am by no means an expert on financial markets, but my layman's observation is that the internet seems to have changed the whole equation dramatically. In 1980, it would have been almost completely impossible for a new-ish company a few years old to have almost a billion customers. But now it's possible, and moreover it's possible to do that without any of those 'customers' having bought anything at all. I imagine that makes the whole game much more volatile.
Once upon a time, there were some very large and very profitable companies whose business centered around "coupons". The difference is that they used to come in your mailbox, and companies paid for inclusion as a means of advertising. This was a very popular business model in the direct mail industry, which could be viewed as a precursor to many of today's internet business models.
So, there are plenty of institutional investors over the age of 40 who saw the Groupon business as something recognizable, and decided to invest, because we like to invest in what we know.
I can't believe I thought history was a boring subject in school. These days, the empowerment of just a little history goes a long way.
Coupons (and loyalty, promotions, advertising, marketing, etc) is a _very_ large business. Groupon is the first company to crack local advertising in a really big new way and had been rewarded handsomely (even if it's current stock price is well off its high). Now that Groupon is getting its business in order and expanding into several other very large adjacent markets, it should remain a compelling business.
Not only does your comment reveal a lack of understanding of finance but business, in general.
I know some people doing data entry jobs at groupon.
1- they hate their jobs.
2- many are hired as temp, and given absolutely crappy wages
3- they are being hired to do something that could easily be accomplished with some programming (i.e., taking data from one system and copy/pasting it verbatim into another system)
That's actually fascinating. And it makes sense from my perspective of a) having been involved years ago in selling coupons to small businesses and b) dealing with small businesses for other things.
You need to give them a turnkey experience, hold their hand and make it easy for them. You show up with the "form" prefilled (I mean like a paper form) and say "sign here and I'll do the rest." And if you drop the paperwork off (say they are out to lunch) you put those little post-it arrows so they have nothing to think about. This is really big with that market. I'm not a fan of groupon but it impresses me that they are operating this way (and that Mason said that).
Only programmers advise throwing code at something that is easily performed by humans. In this case, the humans are 1) more readily available than engineers, 2) cheaper and 3) more flexible.
I have to be honest.. I follow and trade stocks and I hadn't heard that the Groupon IPO actually occurred. The last I had heard they were having to re-file and all that fun stuff because their financials were essentially one great big lie.
Due to all of this, I am not at all surprised the stock is at the level it is. IMHO the web-tech stocks released lately are all a big wash and pushing into Web 1.0 'bubble' territory, dangerously
To be fair, I don't think anyone missed the initial IPO, given that roughly half the stories on HN at the time were about how terrible an investment it would be.
I imagine that if they had to pull and re-file their IPO (not being a follower of stocks, I don't actually know that to be the case), their re-entry into the market was most likely a little more...quiet, shame-faced and chastised, as it were.
Likely I'm just remembering the chain of events incorrectly then! But either way, yeah... that was a boat I saw along with the rest of the tech community that was trying to bail water as quickly as it was coming in.
They could do it through a shell account, then have other shell accounts buy GRPN stock to boost the value further, carve that equity up into AAA-graded commoditized securities and sell them as bonds!
Many recent tech (and non-tech) IPOs are also down significantly (FB, YELP, ZNGA, etc). So while Groupon does have some unique problems, it's also tracking not far off its peer group. But I know HN loves to hate on Groupon.
While "HN loves to hate on Groupon" isn't wrong, it (probably intentionally) implies that it's a HN-specific hive mind thing - whereas to me it seems the hate it based on plenty of pretty logical and objective issues with Groupon's business practices.
I'm sure not everyone has the same view, but my feeling is that a.) those who don't hate on Groupon can at least appreciate why people do and not think it idiotic and b.) it's not specifically about HN people
I don't think it's very logical. I think most of the sentiment has to do with raising lots of money, growing very rapidly, making lots of easy money, etc. These are all things that many here are wary of.
I don't think the crowd here is very supportive of big time success when it is venture backed, involves large fund-raising and prioritized growth over profits.
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[ 3.8 ms ] story [ 136 ms ] threadhttp://www.mondaynote.com/wp-content/uploads/2012/05/Amazon-...
Does this look like a hugely profitable company to you?
[Apple will be an exception here, but they are a very rare case, almost every other growth company looks like Amazon].
I totally see your point (and agree) but there's an important distinction to make in Amazon's case, because there's a big difference between aggressively re-investing your profits into growth and aggressively burning other people's money to grow.
Have you accounted for general market trends? Seasonal cycles? Comparisons to other IPOs? Contrast with other types of companies that aren't part of your perceived bubble?
PE isn't everthing but I wish the press would talk more in terms of comparable valuations than the stock dollar price which doesn't really tell you much.
[1]: http://en.wikipedia.org/wiki/Growth_investing
Thus, the average mom in illinois is far more likely to buy Groupon or FB than JDS-Uniphase or Applied Materials.
Once upon a time, there were some very large and very profitable companies whose business centered around "coupons". The difference is that they used to come in your mailbox, and companies paid for inclusion as a means of advertising. This was a very popular business model in the direct mail industry, which could be viewed as a precursor to many of today's internet business models.
So, there are plenty of institutional investors over the age of 40 who saw the Groupon business as something recognizable, and decided to invest, because we like to invest in what we know.
I can't believe I thought history was a boring subject in school. These days, the empowerment of just a little history goes a long way.
Not only does your comment reveal a lack of understanding of finance but business, in general.
There you will find your answer.
1- they hate their jobs. 2- many are hired as temp, and given absolutely crappy wages 3- they are being hired to do something that could easily be accomplished with some programming (i.e., taking data from one system and copy/pasting it verbatim into another system)
"We view self-service with the same skepticism that a company in California might view hiring a salesperson. And it's ended up working well for us."
So perhaps they also view automation (software replacing humans doing repetitive tasks) with the same skepticism?
You need to give them a turnkey experience, hold their hand and make it easy for them. You show up with the "form" prefilled (I mean like a paper form) and say "sign here and I'll do the rest." And if you drop the paperwork off (say they are out to lunch) you put those little post-it arrows so they have nothing to think about. This is really big with that market. I'm not a fan of groupon but it impresses me that they are operating this way (and that Mason said that).
but my view is skewed as i'm a programmer.
Due to all of this, I am not at all surprised the stock is at the level it is. IMHO the web-tech stocks released lately are all a big wash and pushing into Web 1.0 'bubble' territory, dangerously
I imagine that if they had to pull and re-file their IPO (not being a follower of stocks, I don't actually know that to be the case), their re-entry into the market was most likely a little more...quiet, shame-faced and chastised, as it were.
I'm sure not everyone has the same view, but my feeling is that a.) those who don't hate on Groupon can at least appreciate why people do and not think it idiotic and b.) it's not specifically about HN people