With shares of Groupon (NASDAQ:GRPN) trading around $7, is GRPN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Groupon offers online retail services. The company provides daily deals on the stuff to do, eat, see, and buy in more than 500 markets in 44 countries. It provides an online service that lets groups of people create campaigns to pool resources, including money and personal commitments to take action, and it allows users to sell products and transact business online. Groupon is poised to see rising traffic as it provides consumers with ways to save on common shopping experiences and activities. Look for Groupon to continue to grow and provide consumers and businesses with new opportunities.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!T = Technicals on the Stock Chart are Strong
Groupon stock has witnessed its stock almost double in the last year or so. The stock is currently still trending higher but may need some time to consolidate. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Groupon is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Groupon options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Groupon Options | 64.92% | 50% | 49% |
What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| July Options | Flat | Average |
| August Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Improving Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Groupon’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Groupon look like and more importantly, how did the markets like these numbers?
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 50% | 0.73% | -100% | -111.43% |
| Revenue Growth (Y-O-Y) | 7.53% | 29.69% | 32.17% | 44.77% |
| Earnings Reaction | 11.44% | -24.24% | -29.59% | -27.01% |
Groupon has seen improving earnings and rising revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Groupon’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Groupon stock done relative to its peers, Facebook (NASDAQ:FB), Google (NASDAQ:GOOG), United Online (NASDAQ:UNTD), and sector?
| Groupon | | | United Online | Sector | |
| Year-to-Date Return | 47.12% | -8.45% | 25.92% | 25.13% | 20.51% |
Groupon has been a relative performance leader, year-to-date.
Conclusion
Groupon allows consumers and companies to find a happy medium when transacting for goods or services. The stock has been on a strong path to higher prices since establishing lows just last year. Over the last four quarters, earnings have been improving while revenue figures have been steadily rising, overall producing mixed feelings among investors in the company. Relative to its peers and sector, Groupon has been a year-to-date performance leader. Look for Groupon to continue to OUTPERFORM.
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