The roller coaster continues
Groupon (ticker: GRPN) continues its reign as one of the most volatile stocks listed on the NASDAQ market. The golly green G of daily dealers has had 4 roller coaster swings in the past thirty days of 10% or more. The question is should investors be taking notes of today’s move?
The catalyst
Here are a few reasons that are raising eyebrows:
- The company’s move to compete with Open Table – The acquisition of NYC based Savored opens the door to high end restaurants. The discounts from Savored tend to be smaller than typical Groupon deals (30-40% rather than 75-80%). A primary focus of the site is to assist restaurants in offering up empty tables for patrons to reserve. Many of the high end restaurants on the site offer deals only on off days.
- An initiative into mobile payments – business owners are able to process credit cards on an iPhone through Groupon. Groupon believes it has the lowest fee anywhere at 1.8% plus a 15 cent transaction fee. The idea is to give merchants another reason to work with Groupon. The new merchant processing app will also allow merchants to scan Groupons and track the impact and customer spend for each deal.
- Marketing costs are coming down – In the first quarter of 2011, the G spent $230 million on marketing. In Q2 of 2011 it spent $220 million. As Groupon matures nationally and internationally it seems as though the expense are finally coming down. The combined marketing expense from Q1 and Q2 of 2012 was only $204 million.
The numbers
GRPN shares closed Friday’s session at $ 5.25 up $ .45 (9.37%). Volume was moderately impressive at 18.2 million shares; about 50% above normal daily volume. The shares are back above the psychological $ 5.00 level, which by the way also affects margin requirements. It’s quite possible that some of Friday’s move can be associated with short covering. In a day that saw Zynga (ticker: ZNGA) get kicked to the curb, it was a pleasant surprise to see Groupon trade favorably.
Earnings for GRPN are due out October 11th. Should the company continue forward and meet or beat expectations, then in my opinion, the shares will have a good run. Ascendiant Capital still maintains a target for GRPN at $3.50 per share.
