In spite of the well-publicized and much speculated upon tech bubble, Groupon, the daily discount site, is perhaps the most anticipated IPO of 2011. The $750 million IPO has sparked conversation about the tech-industry and slanted valuations. Much of the discussion though is forward leaning, directed at upcoming IPOs like Pandora, Facebook and the innumerable interactive game producers that have been popping up around Silicon Valley. The excitement over these new ventures is palpable and prior to a potential burst, they do have the potential to be wildly profitable.With those profits though is significant risk. For the more risk-averse but still tech-centric investor, there are stocks that will benefit from IPOs, specifically Groupon, but have activity that cushions shares from a crash.
Expedia (EXPE) is one of these stocks. Beginning in late June, Groupon Getaways with Expedia, a dual effort between the coupon site and the online booking engine, will launch. The feature will offer discounted travel rates. Similar to traditional Groupon, typical discounts will run around 50 percent and will only be available for a limited period. Buyers will have to purchase the discount before the time is up but will have the opportunity to redeem the voucher at a time in the future. Initially, the Groupon getaways will be exclusive to hotel deals in the U.S. and Canada but the plan is to expand the discounts internationally to plane tickets, cruises and other travel add-ons. This represents a major boon for Expedia and shoul help bolster their business without carrying the weight of the risk that Groupon currently has on its shoulders. Furthermore, unlike Groupon, shares of Expedia have been negatively impacted by the sluggish travel industry lately, so remain somewhat depreciated from year-highs. Expedia is further bolstered by its ownership of Trip Advisor, the Yelp-like site focused exclusively on travel. Trip Advisor’s revenue is is growing by 20 percent but with a multiple of 13, according to Jim Cramer.
TravelZoo (TZOO) is certainly not undervalued, but compared to Groupon’s current valuation; it’s something of a steal. Actually, that may be an overstatement, but even still, Travelzoo has a $1 billion market cap and backs Groupon competitor Living Social. Research in the field has indicated Living Social’s deals tend to be more of a bargain for the coupon buyer. It looks like people might be catching on to this, since the average Living Social deal in new York snags around 100 more customers per bargain. Unlike Groupon though, the coupon business is only one elements of its service. With business more diversified, there’s more safety in a stock like this one, even if shares are currently somewhat overvalued.
OpenTable (OPEN) is not always part of the conversation when it comes to tech stocks, which is interesting because of the massive adueince of the site. OpenTable really has revolutionized making a reservation and it seems to have considerable potential for growth and profit. The company has been slow to integrate advertising onto its website, abandoning what would otherwise be revenue. There is; however, perhaps a reason for this, like the way that facebook delayed profit making until it figured out how best to market itself to people and advertisers. Granted, this would be a more mysterious buy, but the concept is there and there are obvious options for profit growth and expansion.
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