Three of the bigger “losers” in the tech space have suffered monumental losses for their shareholders in recent months. Do you think any of these three have a comeback in them?
Groupon (GRPN, Financial)
I’ve been very negative about Groupon for some time now, dating back to before the IPO, in fact. There were many warning signs, such as the massive selling by insiders, the accounting practices being questioned by the SEC and forcing filings to be restated, etc. Even more concerning is the fact that so many competitors jumped in to compete with Groupon. There has been LivingSocial (backed by mighty Amazon), Google, Facebook, Travelzoo, and thousands of smaller more local players. Even yesterday, eBay announced it will start to offer local deals. The problem of course is that it’s incredibly easy for someone to start offering local deals, and so much competition has led to:
- lesser quality offers
- much smaller margins
Things do not look like they’ll turnaround anytime soon. Take a look at this chart:
Research In Motion (RIMM, Financial)
A few years ago (it seems like decades ago, but it’s not that long), smartphones equaled RIMM. Have things changed. The company’s phone quickly fell behind rivals mostly because of software. Its operating system is far behind alternatives from Apple and Google Android phones which has also resulted in lesser quality apps, which seem to have been the fatal blow. The company has been late and bad at product launches, with its Playbook tablet being a great example.
Can the company turn things around? It's possible, although now that it is publicly for sale, I’m not sure what a great scenario is for RIMM. There is no doubt that it’s a difficult one to value but depending on when it sells all or part of itself, there could be an interesting opportunity.
Could it ever get back anywhere near it highs? Unlikely.
Zynga (ZNGA, Financial)
Wow, Zynga has been a huge disappointment for me. It was near the top of my 2012 Tech Stock Power Rankings and has clearly hurt me quite a bit. What happened? Many things, but the main one is that I do agree that Zynga is now run as a business similar to a movie studio that depends on launching new hits constantly. Unfortunately, because of difficult conditions and more competition from established players, that has not happened. Rising costs and virtually no growth in revenues has led the company to flat-line. In the tech world, that is a recipe for disaster. As you can imagine, the stock has not moved favorably. The company is still profitable and expects to remain so next year, so there is clearly the potential for a turnaround. I’m not exactly sure what would be needed for that to happen, though. Just look at this chart from the IPO till now. I sure am happy I wasn’t an early investor or current employee of Zynga.
So there you have it, three stocks that have been performing abysmally in the past few months. Which one is most likely to jump back? In order, I would say:
- Zynga
- Groupon
- Research in Motion
It’s a tough call though. I’d love to get your thoughts.
Groupon (GRPN, Financial) I’ve been very negative about Groupon for some time now, dating back to before the IPO, in fact. There were many warning signs, such as the massive selling by insiders, the accounting practices being questioned by the SEC and forcing filings to be restated, etc. Even more concerning is the fact that so many competitors jumped in to compete with Groupon. There has been LivingSocial (backed by mighty Amazon), Google, Facebook, Travelzoo, and thousands of smaller more local players. Even yesterday, eBay announced it will start to offer local deals. The problem of course is that it’s incredibly easy for someone to start offering local deals, and so much competition has led to:
- lesser quality offers
- much smaller margins
Things do not look like they’ll turnaround anytime soon. Take a look at this chart:
Research In Motion (RIMM, Financial)A few years ago (it seems like decades ago, but it’s not that long), smartphones equaled RIMM. Have things changed. The company’s phone quickly fell behind rivals mostly because of software. Its operating system is far behind alternatives from Apple and Google Android phones which has also resulted in lesser quality apps, which seem to have been the fatal blow. The company has been late and bad at product launches, with its Playbook tablet being a great example.
Can the company turn things around? It's possible, although now that it is publicly for sale, I’m not sure what a great scenario is for RIMM. There is no doubt that it’s a difficult one to value but depending on when it sells all or part of itself, there could be an interesting opportunity.
Could it ever get back anywhere near it highs? Unlikely.
Zynga (ZNGA, Financial)Wow, Zynga has been a huge disappointment for me. It was near the top of my 2012 Tech Stock Power Rankings and has clearly hurt me quite a bit. What happened? Many things, but the main one is that I do agree that Zynga is now run as a business similar to a movie studio that depends on launching new hits constantly. Unfortunately, because of difficult conditions and more competition from established players, that has not happened. Rising costs and virtually no growth in revenues has led the company to flat-line. In the tech world, that is a recipe for disaster. As you can imagine, the stock has not moved favorably. The company is still profitable and expects to remain so next year, so there is clearly the potential for a turnaround. I’m not exactly sure what would be needed for that to happen, though. Just look at this chart from the IPO till now. I sure am happy I wasn’t an early investor or current employee of Zynga.
So there you have it, three stocks that have been performing abysmally in the past few months. Which one is most likely to jump back? In order, I would say:
- Zynga
- Groupon
- Research in Motion
It’s a tough call though. I’d love to get your thoughts.
