$GRPN Ripe For A Short SqueezeGroupon, Inc. (NASDAQ: GRPN) is a well-known e-commerce platform where consumers go to buy services, products, and experiences at heavily discounted prices. While the company’s services are attractive to consumers, GRPN stock has been affected significantly by the pandemic – leading the stock to trend downwards since then. At the same time, GRPN has been witnessing a strong short selling activity which has led the stock to constantly drop to new all-time lows. With this in mind, GRPN stock is one of the most shorted stocks which has made the stock attractive to a wide base of investors looking for a short squeeze to occur. Considering the nature of the company’s offerings and the current inflationary environment, GRPN stock could be poised to run soon especially with the holiday season approaching.
GRPN Fundamentals
Since its inception in 2008, GRPN has grown to prominence thanks to its unique business model where it offers products and services at major discounts. While the company has been performing well financially for years, the pandemic came and GRPN has been hit particularly hard by pandemic restrictions in light of its business model. Despite this, GRPN stock climbed again in 2021 after the company reported exceptional financial results throughout the year which saw the stock reach a high of $64 in March 2021.
While the company appeared to be on a positive trajectory, GRPN stock took a hit this year as the company reported worse financials compared to last year when Covid-19 was more prevalent. As a result, GRPN has been constantly reaching new all-time lows – with the stock recently finding a bottom at $6.35.
Platform Updates
However, the future outlook for GRPN appears to be positive as the company is working to simplify its technology platform and lean more into automation. These changes have been pursued since the Groupon platform is too complex for users which has hindered GRPN’s ability to launch new products and features. Based on this, simplifying the company’s technology platform is expected to allow GRPN to accelerate the pace of its product development while supporting better customer and merchant experience. In this way, GRPN could be well-positioned to grow its revenues once this process is completed – making its current PPS a bargain.
On that note, this potential revenue growth could occur soon considering the current inflationary economic environment and the growing fears of a recession taking place. Based on these fears, consumers are more likely to cut down their spending which provides GRPN with an opportunity to capitalize on this situation through its discounts and deals. Meanwhile, the holiday season is right around the corner, and while the current economic situation is hard for many consumers, they would look for deals and discounts for events or gifts for their families.
Groupon Day
According to a survey conducted by GRPN, more than 80% of consumers plan to spend the same amount or more on gifts for their family and friends than they did in 2021. Moreover, the survey showed that the majority of consumers are planning to spend more on experiences this holiday season. Looking to capitalize on this high demand for discounted items and events, GRPN brought back Groupon Day which ran from October 7 to October 14. As this shopping event featured several substantial discounts off different services and events, Groupon Day could have a positive impact on the company’s Q4 financials – which could send GRPN stock soaring.
SumUp Stake
While many investors are bullish on GRPN’s business model, the company holds additional value thanks to its stake in UK-based fintech company SumUp. While there were reports that GRPN had a 5% stake in SumUp, the company clarified that it only holds a 2.29% stake in the fintech company. With this in mind, this stake remains significant for GRPN since SumUp raised $624 million last June at a valuation of $8.5 billion which would put this stake at nearly GRPN’s current market cap. In light of this, it could be a smart investment to add GRPN stock since its stake in SumUp is yet to be priced into its PPS.
Short Data
Meanwhile, GRPN stock remains to be one of the most shorted stocks as its short interest rate is extremely high. According to Ortex data, GRPN short interest rate is at 50.3% with 72.4% of the float on loan. At the same time, utilization rate is at 100% indicating there are few shares available to short. In light of these numbers, GRPN stock could be poised to soar if it witnesses strong buying activity from investors to allow a short squeeze to occur.
Activist Investors
Investors are also bullish on GRPN’s future prospects thanks to the involvement of activist investor Jan Barta – a partner at Pale Fire Capital – in the company. Since November 2021, Barta has been constantly adding shares of GRPN which he holds either directly or indirectly through PFC. In this way, Barta is now GRPN’s majority shareholder and holds a position on the company’s supervisory board. Meanwhile, Barta’s partner Dušan Šenkypl joined GRPN’s BOD to ensure that PFC is involved with GRPN’s development. Considering PFC’s confidence in the company’s long-term potential, GRPN stock could be a bargain as it continues trading near its all-time low.
GRPN Financials
According to its Q2 report, GRPN continues to perform worse than last year. In terms of revenues, service revenues dropped to $153.2 million compared to $206.1 million a year ago. GRPN also failed to generate product revenues which the company realized $59.7 million from last year. At the same time, operating costs increased from $195.5 million to $200.4 million. However, this increase in operating costs is mainly the result of impairment of goodwill and long-lived assets which accounted for $44.2 million. As a result of the declining revenues and growing operating costs, GRPN reported $90.2 million in net loss compared to a net loss of $3.1 million in the same year-ago period.
Technical Analysis
GRPN stock is currently trading at $6.83 and has a support near 6.38. The stock also shows resistances near 6.93, 7.85, and 9.53. After reaching a new all-time low at $6.35 recently, GRPN appears to be rebounding as many investors believe the stock could be undervalued at that price level. With this in mind, GRPN is moving towards its resistance which is a key price level to watch considering that the 50 MA is near this resistance. In case a break through the resistance is successful, GRPN has the potential to run past $8 easily if enough buying pressure is available. However, in case the stock fails to break through its resistance, this could be a concerning sign for investors as the stock could further drop and reach a new all-time low. With the company set to release its Q3 financials on November 7, GRPN stock could be one to watch in anticipation.
In light of GRPN’s constant drop in PPS, accumulation is trending downwards. However, the MACD is bullish to the upside as the recent dip could be an opportunity to secure cheap shares of GRPN. The RSI picked up from 42 to 53 which could signal a break through the resistance in the near term if investors continue buying shares of GRPN. Considering the stock’s high short interest, GRPN could be a prime short squeeze candidate thanks to its low float of 12.1 million.
GRPN Forecast
While GRPN stock has been severely impacted by the pandemic, GRPN could be poised to return to its pre-pandemic numbers in the near future thanks to the growing fears of an upcoming recession. These fears combined with the current inflationary environment have led consumers to cut down their spending which could be an opportunity for GRPN to increase its revenues through its offered deals and discounts.
GRPN also holds additional value since it owns a 2.29% ownership stake in SumUp. Given that SumUp was valued at $8.5 billion, this stake could attract more investors to GRPN stock as it is not priced into the stock’s PPS yet. As this stake is worth more than GRPN’s market cap, the stock could be poised to surge as more investors are familiar with this stake.
Despite the value GRPN holds in the long-term, the stock appears to be a prime short squeeze candidate thanks to its high short interest rate. If investors are able to pressure short sellers by buying shares and holding, GRPN could soar as it has a significantly low float. On that note, it is worth noting that Barta has been constantly adding to his position in GRPN either directly or indirectly through PFC and has not sold any of his shares. In light of this, GRPN stock could be well-positioned to skyrocket if a short squeeze occurs.
