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People tossed Priceline and Amazon into the trash in 2001...


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Amazon $8 in 2001...$239 today.

 

Priceline  $10 in 2001...$585 today.

 

With a few of today's Web 2.0 "Social Media" stocks history may be rhyming...

 

Groupon, for example, has ~$780 million in shareholder's equity and no debt but is being kicked hard to the curb.

 

There will be some brand equity built up here and the winners in this space will still be around in ten years.

 

Off the wall?

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Groupondoesn't haveamoat.  The local paper, a tv station and a local coupon magazine have all replaced groupon in our area.  They (Groupon) are trying to reinvent themselves by "helping" local non profits.

 

Groupon doesn't have a moat but what did people think of Priceline's moat in 2001 or even Amazon's moat?

 

At what price does Groupon become a "value" or can it never have any value if it doesn't have a moat?

 

Wouldn't that eliminate all newer Internet stocks that may build a moat when value investors aren't looking?

 

 

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Groupondoesn't haveamoat.  The local paper, a tv station and a local coupon magazine have all replaced groupon in our area.  They (Groupon) are trying to reinvent themselves by "helping" local non profits.

 

Groupon doesn't have a moat but what did people think of Priceline's moat in 2001 or even Amazon's moat?

 

At what price does Groupon become a "value" or can it never have any value if it doesn't have a moat?

 

Wouldn't that eliminate all newer Internet stocks that may build a moat when value investors aren't looking?

 

Without a moat it is impossible to predict the future cash flow the company will produce. Will Groupon build a moat and become the next Priceline? It could, but that is speculation. What is it worth? I have no idea. It has a 3B market cap right now. How much would Google or another competitor have to spend displace Groupon? I'd bet much less than 3B.

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http://blogs.smeal.psu.edu/grumpyoldaccountants/archives/742

 

Dig a bit and you'll find more.  Hint: take a look at the past history of management.

 

O.K., I guess I shouldn't have used a fraudlent enterprise like Groupon as an example.

 

But the greater question is then are social media Internet stocks (or any tech stock without a very wide moat) a permanent no man's land for "Prem Watsa" style value investors or could, one day, a company in this space be worth a look based on stock price vs. cash and current free cash flow?

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