Groupon, Inc. (GRPN) is Attracting Investor Attention: Here is What You Should Know

Groupon (GRPN) shares have recently underperformed, declining 3.4% over the past month against broader market and sector gains. Despite this, the stock holds a Zacks Rank #1 (Strong Buy), signaling potential near-term outperformance driven by positive earnings estimate revisions. While current quarter EPS is projected to drop 97% year-over-year to $0.01, full fiscal year EPS is estimated to surge 153% to $0.80, supported by anticipated revenue growth and a history of consistently beating recent earnings and revenue estimates, including a 2400% EPS surprise in its last reported quarter.

Analysis

Groupon (GRPN) presents a conflicting profile, with recent stock underperformance contrasting sharply with bullish forward-looking indicators. Over the past month, the stock has declined 3.4%, lagging both the S&P 500's 4.8% gain and its Internet-Commerce industry's 3.5% rise. Despite this, the company holds a Zacks Rank #1 (Strong Buy), primarily driven by its earnings outlook. A significant near-term headwind is the forecast for current quarter earnings per share (EPS) of $0.01, representing a 97% year-over-year collapse. However, the outlook for the full fiscal year projects a 153% surge in EPS to $0.80, followed by further growth to $0.82 in the next fiscal year. This earnings growth is supported by expectations of accelerating revenue, with forecasts indicating a 6.5% YoY increase in the current quarter and a 10.4% increase in the next fiscal year. Confidence in this turnaround is bolstered by a strong history of recent performance, where Groupon surpassed both consensus EPS and revenue estimates in three of the last four quarters, including a notable 2400% EPS surprise in its last report. Valuation appears neutral, with a Zacks Value Style Score of 'C' suggesting the stock is trading at par with its peers, placing the emphasis for outperformance squarely on the execution of its growth forecasts.

Key Decisions for Investors

• Investors should consider the disconnect between Groupon's recent stock price decline and its 'Strong Buy' rating, which is predicated on a significant projected full-year EPS expansion of 153%.
• It is critical to monitor the upcoming quarterly results to confirm that the expected 97% YoY drop in EPS is a temporary anomaly and does not derail the positive full-year guidance.
• Given the stock's valuation is at par with peers, the investment case hinges on the company's ability to achieve its forecasted revenue acceleration to 10.4% in the next fiscal year, making revenue growth a key metric to watch.
• The consistent history of beating earnings estimates, including a major 2400% surprise last quarter, may provide some confidence for investors willing to look past the severe near-term earnings contraction.