The Buzz

All markets and investing news all the time

Stupid Stock Move of the Day: Groupon up?

June 18, 2012: 3:04 PM ET

A dot-com stock is surging after one of its underwriters upgraded it and people are wondering if the euro experiment will work. If I didn't know any better, I'd say it was 1999. Groupon (GRPN) surged more than 10% Monday. And the only "news" to explain it was that Morgan Stanley (MS), one of the companies that helped bring Groupon public last year, raised its rating on the stock to "overweight" from "equal weight."

In fairness to Morgan Stanley analyst Scott Devitt, it's admirable that he didn't launch coverage earlier this year with the most glowing review possible. My issue is with traders who continue to play the silly game of boosting stocks on innocuous events like analyst upgrades to begin with.

In its short history as a public company, Groupon hasn't exactly proven itself to be a solid stock. The company has had its share of accounting issues. It missed earnings estimates (actually it posted a surprise loss) the first time it reported financial results following its IPO. And it does strange things like announcing it will allow users to pay it $1000 if you name your child Clembough. Then there's that scary-looking Clicky tihng.

I'm all for having a sense of humor. But long-term investors are often less forgiving.

The bottom line with Groupon is that it is still, at more than 60 times 2012 earnings estimates, a very expensive stock. It's also operating in a business that many people think is the most easily replicated. Sure, there is probably some brand loyalty to Groupon. But for all the bad press that Facebook (FB) and Zynga (ZNGA) are getting about their business models as of late, they both seem to be in far better position to prosper over the long haul than Groupon.

Looks like a few of my Twitter followers agree.

https://twitter.com/JustinIV/status/214764635272916993

Posted in:
Join the Conversation
Fear & Greed
Sponsored by
About This Author
Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! $F down another 1.5% after 7.5% drop yesterday? Now only at slight premium to $GM? Really? Overreaction.
Powered by WordPress.com VIP.
Follow

Get every new post delivered to your Inbox.

Join 242 other followers