Prof. Aswath Damodaran published recently two very interesting articles about Groupon/Facebook, containing among other things revaluation of his initial IPO pricing. As usually he published his spreadsheets, allowing others to follow and customize his assumptions.
His Groupon revaluation:
I go along with his view that Groupon is, despite the huge drop in share price, not a buying opportunity. They have problems in defending their business model, since entrance barriers are very low. To me it seems doubtful whether all the marketing expenses used for acquire merchants and customers will flow back in the end. Merchants seem to be disappointed by the return rate of the deal buyers, also Groupon seems to neglect quality more and more, esp. not checking if merchants are able to provide the quantity that might possible be sold.
Additionally it seems to me that all the daily deal topic was a big hyped and is now slowly getting cold. There is nothing new or exciting more in buying such Coupons, and most people are probably just bugged by all the mail advertising every day containing often a) uninteresting deal-items or b) discounts that in the end turn out to be quite small.
I go in line with Damodaran conclusion, that Groupon is just about to be fair valued, i would even go further and say that its still overvalued. Also there is considerable momentum downward what might hold potential buyers back.
His Facebook revaluation:
Damodaran finds Facebook to be undervalued.
I find it hard to judge that, since future development is so uncertain. Much depends on the question, whether a sound business model can be found. When this will be the case, it doesn't take much to say that the upside potential would be very big.
One might see the buying of FB stocks as a bet on this question, however its quite a risky one, since downside is still considerable. The assets FB has are his users and their data, pictures, etc. But if this assets cant be turned into money by FB, it seems unlikely that they will be of much worth to others.
This makes a bet quite risky.
