Groupon Inc.: Triple-digit Upside for GRPN Stock? It’s Possible
Has GRPN Stock Finally Bottomed?
If anything charitable could be said about the track record of Groupon Inc (NASDAQ:GRPN) stock, it would be that it has been consistent—albeit as a consistent disappointment to investors. But changes in the company’s product and service offerings, not to mention its leadership, appear to signal that this struggling stock is ready for a revival. But is anyone paying attention to these developments?
Up From the Ashes?
Six years ago, Forbes hailed the then-private Groupon under the headline “Meet The Fastest Growing Company Ever”—but the distance from media hype to investor confidence seemed greater than the company had anticipated.
When GRPN stock went public on November 4, 2011, shares hit their all-time high of $31.14 on that very day, and, in the years that followed, GRPN stock took a staggering descent—at one point, losing 93% of its original value. Indeed, expectations about Groupon stock have become so limited that the company had earned a modicum of investor enthusiasm when its shares managed to inch above the $5.00 mark last month.
So how could the Chicago-based Groupon elevate itself from bottom-feeder status and move back to becoming the source of praise? Efforts began in the second quarter of 2015 with the debut of the Groupon “Goods” private label lines for men, women, pets and homes—all of which proved to be popular with consumers. This summer, the company cleverly piggybacked on the Olympics-mania with the debut of its “Form+Focus” line of activewear for women.
Its efforts have already harvested results: Groupon Goods was responsible for approximately 60 percent of the company’s second-quarter revenue, and the National Retail Federation ranked Groupon Goods at number 29 on its prestigious “Hot 100 Retailers 2016” list. (Source: “Groupon Goods debuts private-label clothing line for fitness fans,” Chicago Tribune, August 4, 2016)
The company is also taking a bold risk by expanding into the highly competitive world of urban on-demand food delivery service. In March 2015, “Groupon to Go” began as a pilot program in Chicago with a network of 500 restaurants, complete with flexible payment options including “Apple Pay” and a slate of special delivery deals and options. The service was formally initiated in August 2015 and it recently expanded into the Denver market. (Source: “Groupon (GRPN) Expands Food Delivery Service to Denver,” Zacks, August 17, 2016)
Also aiding Groupon’s efforts was having a corporate leader with a can-do attitude to trumpet the company’s values while extinguishing doubts over its viability. In December, co-founder Eric Lefkofsky was replaced as chief executive officer by Rich Williams, who joined Groupon in 2011 as senior vice president of marketing and gained promotions to president of North American operations and chief operating officer. (Lefkofsky was placed in the chairman-of-the-board seat.) Williams has quickly become an effective spokesperson for Groupon, most notably last month in his spirited pushback when CNBC’s Andrew Ross Sorkin tartly questioned whether the company was fighting for its life.
“I feel like we’re fighting for customers every day,” Williams firmly stated. “I don’t feel like we’re fighting for our lives at all. We’re fighting to build a great business. We’re fighting to deliver value to shareholders and those are great fights to be a part of.” (Source: “Groupon (GRPN) CEO Williams Talks Growth on CNBC,” TheStreet, July 28, 2016)
For Groupon fans, this new energy is certainly invigorating to behold. But the real question is whether any of this commotion is being channeled into financial wellness. So far, it is difficult to ascertain a consensus.
In late July, Groupon presented its second-quarter revenue report with a proud full-year revenue forecast that sales would reach as high as $3.1 billion this year, up from a previous forecast of $3.05 billion. GRPN ascended by 26% in late trading based on that news—shares had already seen a 23% climb through the year up to that point—and Williams happily told the media: “You are starting to see those early signs of progress.” (Source: “Groupon Shares Surge on Higher Sales Forecast for Rest of Year,” Bloomberg, July 27, 2016)
But not everyone is convinced that GRPN is on the upswing. Although Maxim Group’s analysts gave GRPN a “Buy” rating in June, Piper Jaffray Companies issued an “Overweight” rating to Groupon stock last month and RBC Capital Markets lowered its rating from “Sector Perform” to “Underperform” in May. Even Groupon executives seem a little nervous that the good news may soon dissipate; directors Peter J. Barris and Bradley A. Keywell recently sold 640,045 and 500,000 GRPN shares, respectively, while Chief Accounting Officer Brian Stevens sold 10,000 shares. Groupon insiders currently own 21% percent of the GRPN stock. (Source: “Groupon Inc (NASDAQ:GRPN) Analysts Recommendations and Insider Trading,” Zergwatch, August 15, 2016)
The Takeaway on GRPN Stock
In wondering about GRPN’s resurrection, it is easy to echo the cranky inquiries of countless children on long road trips: Are we there yet?
The answer, however, seems to be that we are not there yet, but at least we are on the right road. The degree of reanimation needed to boost GRPN to where it should be performing will require more time and planning. But barring a ridiculous catastrophe, it is hard to imagine how Williams and his team could fail to reach these goals—especially as their short-term results are already bearing fruit.
With Groupon’s corporate performance slowly gaining strength, acquiring GRPN shares now could be a shrewd investment for those with the capacity of patience and the willingness for a long-haul journey to success.