By BubbleBustInvesting:In its first earnings release since became public, Groupon (GRPN) missed analyst estimates on the bottom line, but beat on the top line. Specifically, the company reported a loss of 2 cents, missing the 3 cents profits analysts expected. Revenues came at $506 million, exceeding the $475 million estimate. Obviously, markets didn't like the results, as the stock was sharply lower in after-hours trading. What should investors do?
Stay away from the stock, as the company doesn't have a sustainable competitive advantage. Groupon's business model is based on three economic concepts that allow the company to enjoy an advantage over its competitors: "economies of networking", "economies of scale," and the "power of WOM and Buzz."
Economies of networking arise on the demand side of the market, when consumers buy a product in groups rather as individual units, the larger the number of consumers joining the group, the greater the benefit
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