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Groupon (GRPN) Surges 6.2%: Is This an Indication of Further Gains?

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Zacks Equity Research
·2 min read
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Groupon (GRPN) shares rallied 6.2% in the last trading session to close at $61.18. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 54% gain over the past four weeks.

Groupon extended its rally driven by continued optimism surrounding its pivot strategy and restructuring efforts to contain costs. The company also posted better-than-expected fourth-quarter 2020 results on Feb 25.

As a part of its pivot strategy, the daily deals provider has been expanding inventory to boost billings growth and improve purchase frequency. It is also focusing on modernizing the marketplace to enhance merchant and customer experiences.

Groupon is shifting focus toward local services market, which it estimates to be a $1-trillion opportunity. The company also announced the completion of migration of the North America Goods category to third-party marketplace model in 2020. International transition will begin in the second quarter of 2021 and is anticipated to conclude by the third quarter. The transition is expected to bode well for the e-commerce company.

Post the earnings beat, Groupon witnessed a few bumps in ratings from analysts. J.P. Morgan upped its rating on the stock to neutral from underweight and increased price target to $48 from $23. Credit Suisse upped the price target for Groupon to $35 from $31.

Price and Consensus

Price Consensus Chart for Groupon
Price Consensus Chart for Groupon

This online daily deal service is expected to post quarterly loss of $0.57 per share in its upcoming report, which represents a year-over-year change of +65%. Revenues are expected to be $180.41 million, down 51.8% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Groupon, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on GRPN going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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