Folks, when a stock rockets over 30% in a single day, you better believe we’re paying attention! That’s exactly what’s happening with Groupon (NASDAQ: GRPN) today, as investors are going absolutely BONKERS over the company’s shocking first-quarter profit.
As of this writing, shares of the once-struggling daily deals marketplace are surging more than 30% to around $22.38, making it one of the biggest gainers in the entire market today. So what’s driving this MASSIVE move? Let’s break it down, booyah!
The Surprise That Has Wall Street Buzzing
In a classic “expectations game” victory, Groupon absolutely CRUSHED analyst projections when it reported first-quarter earnings after yesterday’s closing bell. The company posted an earnings per share of $0.18, completely demolishing Wall Street’s expectations for a LOSS of $0.11 per share. That’s not just beating estimates—that’s taking estimates out back and teaching them a lesson they won’t soon forget!
Revenue came in at $117.2 million, also topping the $115.5 million analysts were expecting. While that revenue number is actually down 5% compared to the same quarter last year, it’s up 4% when you factor out currency fluctuations—and in today’s market, ANY growth is something to celebrate.
Signs of a Turnaround Finally Taking Hold
For those who haven’t followed Groupon’s saga in recent years, this company has been desperately trying to reinvent itself after its daily deals business model fell out of fashion faster than bell-bottom jeans. But today’s monster move suggests some investors believe the company’s turnaround strategy might FINALLY be gaining traction.
The North America local billings segment—arguably the most important piece of Groupon’s business—is now showing “double-digit growth,” according to CEO Dusan Senkypl. That’s HUGE, people! It’s like finding water in the desert after a long drought.
“With North America Local Billings accelerating to double-digit growth and our local marketplace strategy showing green shoots across geographies and verticals, we are building momentum and expect to continue to accelerate our growth,” Senkypl said in the earnings release.
The Numbers Behind the Boom
Let’s look at some key metrics that have traders frantically hitting the “buy” button today:
- Gross billings totaled $386.5 million, up 1% year-over-year (2% when adjusted for currency)
- Operating cash flow was flat, which may not sound impressive, but flat is better than negative!
- Cash position stands strong at $226.8 million
- Company raised its full-year billings growth guidance to 3-4% (up from previous 2-4%)
Now, it wasn’t all sunshine and rainbows. Unit sales dropped 6% year-over-year to 8.5 million, and the active customer count decreased 4% to 15.5 million. Gross profit also dipped 4% to $106.3 million. But in this market, investors are clearly focusing on the POSITIVES, baby!
Short Squeeze Adding Fuel to the Fire?
One factor potentially supercharging today’s rally? Short interest in Groupon stock was sitting at a whopping 35.86% of the float, according to the latest data. That’s an ENORMOUS amount of bearish bets against the company!
When a heavily shorted stock delivers unexpected good news, it can trigger what we call a “short squeeze”—where short sellers race to cover their positions by buying shares, sending the price even higher in a vicious (or virtuous, depending on which side you’re on) cycle. It’s like watching a bunch of people simultaneously try to exit through a single door—CHAOS and PANIC buying ensues!
What’s Next for Groupon?
Looking ahead, management is projecting second-quarter revenue between $121 million and $123 million, comfortably above the $119.66 million consensus. They’re also forecasting second-quarter billings growth of 4% to 7% year-over-year.
For the full year, the company reaffirmed its revenue guidance of $493 million to $500 million, which aligns with Wall Street expectations of around $497 million.
Should You Buy Now?
Here’s the million-dollar question: Is it too late to jump on this rocket ship, or is this just the beginning of a larger move higher?
It’s worth noting that even after today’s explosive gains, Groupon stock is still trading below the $30 price target set by ROTH MKM analysts last October. The stock is also still in the midst of a remarkable recovery, having climbed from lows around $8 in late 2024 to today’s prices above $22.
That said, the company still faces significant challenges. Groupon is battling declining user numbers and operates in a highly competitive space where consumers have countless options for finding deals and discounts. The road ahead won’t be easy.
Plus, with a forward P/E ratio now sitting at about 55 after today’s surge, the stock isn’t exactly in bargain territory anymore. Investors are clearly pricing in substantial earnings improvement going forward.
Bottom Line
Groupon’s surprising profit and improved outlook have given investors a reason to take a fresh look at this comeback story. The combination of better-than-expected results, raised guidance, and a massive short squeeze has created a perfect storm sending shares into orbit today.
Whether this rally has staying power will depend on management’s ability to continue delivering on its promises and showing that the North American billings growth is sustainable. For now, the market is giving Groupon a much-needed vote of confidence.
If you’re considering a position in GRPN, remember that stocks that surge this dramatically in a single day often experience some pullback as short-term traders take profits. Patient investors might find better entry points in the days or weeks ahead.
Remember, the market rewards companies that can consistently deliver upside surprises—and punishes those that don’t. For today at least, Groupon has given the bulls plenty to cheer about!
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