Groupon reports Q2 on Monday August 13th
According to Zacks research, the consensus estimate has not risen from three months ago when it was a loss of 3 cents. Analysts are expecting a loss of one cent per share for the fiscal year. Revenues are a key issue for the company and they are projected to remain flat at $574.2 million for Q2. For the year, revenue is projected to come in at $2.39 billion.
It is interesting to note that the majority of analysts believe that investors should stand pat on Groupon (‘hold’ if you own shares), with 11 of 18 analysts rating it hold. Several analysts have become more cautious about the stock in past last three months. The price targets are all over the map. I have seen one as high as $ 17.00 and another as low as $ 5.00. The majority seem to be stuck in the $7.50 to $10.00 range
Today was a lackluster trading session for the general markets with a slight bias to the downside. GRPN closed at $ 6.65 down $ .28 (4.04%) on 6 million shares. That is about 25% below the normal daily trading volume for GRPN.
Update – For what it is worth, before I posted this article, shares of GRPN were trading at $ 6.93 up $ .28 in the aftermarket.
GRPN has been a favorite of shorts since the IPO. Many may recall that in May of this year, the shorts got crushed when Groupon announced revenue numbers. The shares exploded over 50% in two trading sessions. It should be very clear since then that there is little to no love for Groupon. It will be interesting to see how traders react to the stock tomorrow going into the weekend. In May there were rumors of leaked revenue numbers (none of which were substantiated) that caused early buying in the stock. Keep an eye out for funny stuff tomorrow as traders jockey for various positions.
Points of interest is the support line at the $ 6.35 level and resistance lines at $ 7.60 and then again at the $ 8.90 level. Should numbers come in positive or at least be perceived as positive, there could be a decent trading opportunity in GRPN shares and derivatives.
The valuation algorithm I use values GRPN at $ 7.86 per share. Hence Groupon is somewhat undervalued compared to its price of $ 6.68 per share. Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitability increase, and when interest and inflation rates decrease.
For disclosure purposes I am considering an August derivative position in Groupon shares, completely dependent on the action (price and volume) I see on the stock on Friday, August 10th.
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