Friday, June 03, 2011

Groupon IPO (2): $30bn seems to be more like 10 Groupons

According to the New York Times, Groupon could be going for $30bn valuation. Two more reasons (see also previous post) why this looks like a stretch.

First, simply check out the losses in this graph.

Second, let's take a look at the EV/sales ratio. Google's ratio stands at 4.94, Amazon's at 1.71 and Ahold's at 0.37. To arrive at Groupon's 2011 revenues, we assume no further acquisitions. Here bis how we calculate the current organic growth rate:
  • 11Q1: revenue $645m, of which $298m in North-America.
  • In 09Q2, Groupon's revenue (North-America only) came down to $660,000 per market. We really want the 'same store sales' to filter out the effect of acquisitions. We take the revenue per North-American market as a proxy. In 11Q1, this number was $1.70m.
  • This works out to be an annual growth rate of 72 percent. Still quite high, but not as astronomical as the total revenue growth numbers. We assume that this drops off quickly to more normal levels, dus to competition and market saturisation.
If we apply these multiples to the estmimated 2011 revenues, Groupon would be valued anywhere between $1.6bn (a la Ahold) and $21.9bn (a la Google).

We would argue that Groupon's value could be between the Ahold reference and the Amazon reference ($7.6bn). Groupon's organic growth is higher now, but we assume that it is dropping off quickly. The $30bn valuation seems to be more appropriate for 10 Groupons. In other words, when Google offered $6bn they should have taken the money and run.

No comments: