Is Apathy the Groupon (GRPN) Green Light We've Been Waiting On?

Being a financial/market journalist is a fascinating career. I'm in a unique position of not only exploring the ins and outs of all the major stock stories, but my job is to log those stories - and their changes - over time. The very nature of the work commits those bigger stories like Groupon Inc. (NASDAQ:GRPN) to my memory, for better or worse, but I'm a much better investor because of it.

More relevant to today (and more relevant right now, for GRPN fans and followers), I've watched the Groupon story follow the same path as hundreds of other startup companies. Based on what I've seen and written-up several hundreds of times about all those other startups, I think it's finally time to start wading into a long-term Groupon trade.... not because the market is wildly bullish on it, and not even because of me bias for contrarian stance (where you bet against the crowd). The reason it's time for real investors to consider taking on GRPN now is largely because nobody cares about the story anymore, bearishly or bullishly.

Here's the basic pattern I've seen repeated by a countless number of new, young companies in my career as an observer of the equity market.

1. Develop a revenue-bearing idea, technology, or product we've never seen before
2. Unveil it and create a huge buzz among consumers
3. Convince the market that you're the best thing since sliced bread
4. Induce the media and stock analytics industry to tout your story
5. Convince those consumers to invest on the concept (as opposed to investing in results)
6. Raise money through an IPO and watch stock run up shortly after
7. Fall well short of ridiculously high expectations you told investors to expect
8. Watch stock come crashing down as investors' hearts are broken
9. Continue to watch stock drift lower as even the most die-hard fans grow ire
10. Once investors have written you off, regroup and reassess the business
11. Watch media coverage dry up, and watch investor interest dissolve
12. Revamp the business into a size and model that's actually sustainable
13. Slowly re-attract investors looking to invest in results rather than a concept

Even if you've only been in the market for a few years, you've already seen this story at least dozens of times. Some of the higher-profile examples include MySpace (though it was never public, it's a pattern that News Corp. experienced), Facebook (which is on step 9 or 10 right now), AOL (in the late 90's and early 2000's), Zynga, Vonage, Pets.com, ReneSola, Yelp (also somewhere around step 10), Webvan, and dozens of others I don't have time to list. With the exception of Webvan - and Pets.com to some extent - all of these businesses are marketable, revenue-bearing ideas. None of them, however, have lived up to the hype that was being tossed around when they first went public.

Now Groupon is in the same category... it's not a bad idea, and now that the category exists, it will not likely every go away. As is always the case though, the growth rate will slow as customer attrition starts to chip away, and the company will have to contend with a much smaller base of interested clients and consumers than first anticipated. It's still a functional idea though.  

As for the timing, I wasn't joking when I said the current apathy surrounding (or I guess not surrounding) the stock means now's the bottom. There's no way I'd buy in when the hype was all bullish as it was in the latter part of last year. And, I'm also not a fan when hate is running rampant, as it was for the better part of this year while GRPN shares were cratering. Now nobody cares either way - they're not even bothering to hate the stock; the media barely touches it anymore. That's how I know it's time to get in. All the hype and unpredictable influence has been squeezed out of the stock's price, and what we have left as actual, plausible value. It may be a heck of a lot less compelling than it was a year ago, but with a P/S ratio of 1.5 and a legitimate forward-looking P/E of 12.5, you could certainly do worse.

Welcome to the market, where hype can destroy portfolios, and where the best ideas are the ones you never hear about.