investing in tech
For over a year now former Google all-star Marissa Mayer has been at the helm of Yahoo! Inc. (Nasdaq: YHOO) and has managed to steer the ship in one focused direction.
So far Wall Street has been enamored with Mayer as a businesswoman and a personality. She has outlined a much clearer vision for Yahoo than her predecessors.Read more
After Saving My Life, This Technology Will Save Your Retirement
The technology I want to tell you about today is one of my best investment ideas.
And not just because it saved my life.
I'm talking about "location-based services," the technology that allows your smartphone to show where you are ... or tell you where you need to go.
It's a technology that has double-your-money profit potential because of all it can do. It can help you find the nearest retail sale, guide you to the seafood house where you have reservations, or get you to a hotel for a good night's sleep.
It can also help you avoid costly navigation errors - and not just in a car.
Two summers ago, while sailing with my crew out on San Francisco Bay, an exceptionally heavy fog rolled in. We grabbed a smartphone, discovered we were off course, and traversed the dangerous Berkeley Reef - which would have ripped our keel right off had we not turned.
And the drama involving location-based-service technology doesn't end there.
You see, this market has finally reached critical mass and is poised to skyrocket.
A Guide to Pricing and Investing in Tech IPOs
Earlier this week, I shared with Money Morning readers a breakdown on how IPOs are priced.
In this IPO pricing overview, Money Morning Capital Wave Strategist Shah Gilani explained the pitfalls of over- and underpricing an IPO.
Is Groupon (Nasdaq: GRPN) the Next Enron?
Is Groupon the next Enron? ... No. It's worse.
Before the company even went public, there were signs that internal financial controls weren't up to snuff.
Now I'm hearing refrains of "three blind mice" as "defrauded" investors line up to have their day in court. You might as well say the "dog ate my homework."
It's not like no one knew this was coming.
The U.S. Securities and Exchange Commission (SEC) made management redo Groupon's financial statements and accounting practices not once, but twice before the company's January 2011 initial public offering (IPO).
The first time involved including the cost of marketing in operating income - duh. The second was to force the company to deduct merchant payments from revenues - double duh!
Both are basic accounting principles.
If you spent $2 to gain $1 in orders you have to report that as a $1 loss if you're dealing with cold, hard cash. Also, if you have $1 in merchant payments, you can't count that as $2 in revenues, unless apparently you work at Groupon and love accrual accounting.
It's not like Groupon execs can claim they didn't know.
It's abundantly clear to me that the "company" has very little, if any, understanding of REG FD and securities litigation.
(REG FD, in case you are not familiar with it, is short for Regulation Fair Disclosure which the SEC adopted Aug. 15, 2000. REG FD is intended to eliminate selective disclosure of material non-public information.)
But I have a hunch they're going to find out the hard way.
Groupon's "Material Weakness"When the SEC came knocking again on April 2nd the company was forced to restate its Q4 financials. That summarily reduced Groupon's revenue by $14 million and profits - assuming there were any to begin with - by $22.6 million.
In an official statement, Ernst & Young, the company's primary auditor, noted "material weakness" with regard to the company's internal controls. Investors simply noted that they'd better get going while the going was good.
Groupon's share price tumbled 16.87% Monday alone and is down 55% from its peak.
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Groupon Inc. (Nasdaq: GRPN) Earnings Report Sends Investors Bailing on the Stock
Today's (Wednesday's) Groupon Inc. (Nasdaq: GRPN) earnings report - the first since the company went public in November 2011 - failed to show investors why they should believe in the social media-related stock.
Groupon reported a net loss before adjustments of $42.7 million, or 8 cents a share, compared to a net loss of $378.6 million, or $1.08 a share, for the same period last year. Revenue rose 194% to $506.5 million.
Wall Street expected earnings per share of 3 cents on $475 million in sales. With profit missing expectations and disappointing investors, shares fell 12% in after-hours trading.
The lower-than-expected earnings fueled the bearish outlook on Groupon.
"True, Groupon has plenty of cash in the bank and no debt, but you can find much better tech companies out there with stronger cash flow and solid earnings," Money Morning Defense and Technology Specialist Michael Robinson said last month. "For 2012, GRPN is a tech stock to avoid."
Avoid Groupon Inc. (Nasdaq: GRPN)Groupon has slipped about 7% since its first trading day Nov. 11 to Wednesday's closing price of $24.58. Wall Street has a one-year price target of $25.06 - a mere 2% gain from Wednesday's close.
Groupon stock, along with last year's other Internet IPOs LinkedIn Corp. (NYSE: LNKD), Pandora Media Inc. (NYSE: P), and Zynga Inc. (Nasdaq: ZNGA), got a pop from recent investor excitement over the Facebook IPO. Groupon was up 7% Feb. 2, the day after Facebook made its IPO filing. LinkedIn rose 6%, Pandora 3%, and Zynga 17%.
Regardless of a recent share price spikes, the Internet IPOs of last year still face the growth and profitability obstacles that turned investors off before.
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