GRPN Stock: Will History Repeat Itself with Groupon Inc?

GRPN StockIf you held Groupon Inc (NASDAQ:GRPN) stock going into its last earnings report, good for you. In just two trading sessions after its earnings release, Groupon stock skyrocketed a whopping 82.1%!

To be honest, part of that rise was due to Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) disclosing its 5.6% stake in Groupon. Still, that was an impressive run.

The best part is that unlike many other tech companies, there were no pullbacks in Groupon stock after a giant surge. Trading at $4.46 per share, GRPN stock’s price has almost doubled since its previous earnings report.

Now, the company is reporting earnings again. Will this spark the next rally in Groupon stock?

82% Gain Last Time This Happened

Well, other than the surprise news of Alibaba’s stake, Groupon did release a solid earnings report back in February. In the fourth quarter of 2015, the company generated $917.2 million in revenue, easily beating Wall Street’s expectation of $845.0 million. (Source: “Groupon Announces Fourth Quarter and Fiscal Year 2015 Results,” Groupon Inc, February 11, 2016.)

The bottom line was the real surprise, though. Analysts weren’t expecting much, with an average estimate of $0.00 for Groupon’s Q4 2015 earnings per share (EPS). How did the company do? Groupon delivered earnings of $0.04 per share.

Note that the company is moving away from rapid international expansion and focusing more on improving its local business. Due to Groupon’s transition phase, analysts are not expecting that much this time.

Wall Street expects Groupon to generate $717.52 million in revenue for the quarter, which would represent a 4.4% decrease year-over-year. The bottom line is also projected to deteriorate, from $0.03 EPS in the year-ago period to a loss of $0.02 per share this quarter. (Source: “Analyst Estimates,” Yahoo! Finance, last accessed April 27, 2016.)

Facing lower estimates might not be a bad thing. By setting the bar lower, there is a better chance of overachieving. And don’t forget what the earnings beat did to Groupon stock last time.

Will New Stakeholders Give a Boost to Groupon Stock?

The new stakeholders on board might also be catalysts for GPRN stock. The first one was Alibaba, which disclosed a 5.6% stake in Groupon. Less than two months later, Groupon announced that it had received a $250-million investment from Atairos—an investment firm backed by Comcast Corporation (NASDAQ:CMCSA).

Investors should pay attention to what the company might say about this matter in the earnings call. In particular, with new stakeholders on board, analysts will likely ask whether Groupon has plans exchanging experience with Alibaba.

Despite the fact that Alibaba’s purpose of acquiring its Groupon stake was to learn about the consumer market in the U.S., it does have a lot of experience to offer to Groupon in return. After all, the company is behind the largest group buying site in China, Meituan Dianping.

Moreover, Alibaba said before that the company is willing to share experience with Groupon. In particular, Groupon might want to get some insights on how to connect with local businesses from Alibaba. That would be in line with the company’s current strategy of focusing on the local level.

The Bottom Line on GRPN Stock

Other than the top- and bottom-line numbers, investors should also watch the company’s gross billings, which represent the dollar value of customer purchases of goods and services through Groupon. In North America, Groupon’s gross billings have been increasing quite impressively on a constant currency (FX neutral) basis, it will be nice for GRPN stock if that growth continues to the reporting quarter.