Groupon reports Q2 on Monday August 13th
Yesterday, I pondered the earnings preview and what potentially could happen to shares of Groupon (GRPN) stock during today’s trading session. Well for those that follow Groupon, today was like a déjà vu moment taken from the trading pages of GRPN in May – prior to earnings.
My calculated assumption surrounded short covering going into the weekend along with a few die-hard traders that believe in the ‘G’ ahead of the August 13th earnings report. Since I don’t anticipate earnings, the Street will primarily be focused on revenues and the outlook heading into quarters three and four. Hopefully Andrew Mason will take time off from waiting tables long enough to address the shareholders and make some positive comments backed by numerical data.
The numbers
Today was a decent day for Wall Street as the confirmed up-trend continues, despite that fact that commodities are making negative headlines – corn and other staples continue to go through the roof, which could damage the consumer as we head towards the back half of 2012. The big G was on the positive side of the equation all day long. Shareholders were treated to two mini melt ups, one early in the session and one late in the session that helped GRPN to tag $ 7.62 on an intra-day basis. The shares closed at $ 7.44 up $ .79 (11.88%) on 10.47 million shares. That is about 25% above the normal daily trading volume for GRPN.
Shares of GRPN were trading down $ .02 at $ 7.42 in the aftermarket.
Trading the technicals
As I mentioned in yesterday’s report, GRPN has been a favorite of shorts since the IPO. In May of this year, the shorts got crushed when Groupon announced revenue numbers and the shares exploded over 50% in two trading sessions. Today was definitely a solid day for the company as far as share pricing is concerned, but ONLY for those that had the courage to dive in when the price was below $ 7.00. Since tagging the $ 6.35 level on August 2nd, GRPN has appreciated $1.09 or 17%.
On the outside, that is a fantastic return in less than 10 days. For those shareholders owning stock in the 10’s, 20’s and 30’s, $1.09 increase is like fixing a small dent in a demolition derby car. Share pricing briefly pierced the resistance line at $ 7.60 that I mentioned in yesterday’s report before selling came in. In my opinion, Monday and Tuesday will be key for setting up Groupon’s direction for the balance of 2012. Should GRPN take out the $ 7.60 level on good volume, there could be a real shot at the $ 8.90 level.
I had a few e-mails asking me about the derivative trade I mentioned yesterday. Because of the short term nature of the trade being based on earnings due out on August 13th, I was monitoring the August 7 Call option. That option appreciated by as much as 84.6% during today’s trading. That option expires on Friday, August 17th. If shares of GRPN close above $7 on Friday, the 7 Call will have an intrinsic value of the closing price minus the $7 strike price. At $7 or below, that option will expire worthless – hence the risk of option or derivative trading.
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