Why Groupon Stock Rose 4% despite Revenue Plunging

On Tuesday, Groupon (NASDAQ:GRPN) stock rose nearly 4% in after-hours trading following its results for the first quarter of fiscal 2020. The e-commerce company posted higher-than-expected results in the first quarter despite COVID-19 fears. Groupon’s sales and earnings numbers beat Wall Street analysts’ consensus expectations.

In the first quarter, Groupon reported an adjusted EPS of -$1.63 compared to $0.60 in the first quarter of 2019. The earnings beat analysts’ consensus estimate of -$1.91 per share. Groupon generated sales of $374.2 million—a reduction of 35.3% from the first quarter of 2019. The company beat analysts’ consensus revenue expectation of $369.1 million. Groupon finished the first quarter with $667 million in cash reserve. In 2020, layoffs and furloughs will likely result in cost savings of $100 million.

In the first-quarter earnings release, Groupon’s interim CEO, Aaron Cooper, said, “COVID-19 has had a major impact on our business and we have moved quickly to position Groupon to weather the pandemic and to help our merchants face these unprecedented challenges.” Cooper also said, “At the same time, during the first half of 2020, we created a more agile organization that is focused on improving the long-term health of our marketplace. Notwithstanding the challenges created by the macroeconomic landscape, we continue to believe we have distinct competitive advantages that will allow us to take share in the highly fragmented, $1 trillion-plus local experiences market.”

Wall Street analysts expect Groupon to report an adjusted EPS of -$2.14 on revenue of $179.1 million in the second quarter. Analysts also expect Groupon’s revenues to decline by 55.7% YoY (year-over-year) in 2020 to $982.1 million. The sales could fall by 17.1% YoY in 2021 to $814.5 million. Meanwhile, they expect an adjusted EPS of -$4.56 and -$0.27 in 2020 and 2021, respectively.

Among the nine analysts following Groupon stock, three recommend a “buy,” four recommend a “hold,” and two recommend a “sell.” Wall Street analysts’ mean target price on the stock is $26.66, which implies a 2.1% loss from the current level of $27.23. The consensus target price for the stock has risen from $25.08 in May—a growth of 6.3%.

Groupon stock rose 12.7% on Tuesday and ended the day at $27.23. At this closing price, the company’s market cap is $773.2 million. Notably, the stock is trading 62.7% below its 52-week high of $73.00 and 183.7% above its 52-week low of $9.60. So far, the stock has fallen by around 43% year-to-date.

Based on the closing price on Tuesday, Groupon stock was trading 4.7% above its 20-day moving average of $26.01. The stock is also trading 18.1% above its 50-day moving average of $23.06 and 4.4% below its 100-day moving average of $28.48. Groupon’s 14-day relative strength index number is 53. The number suggests that the stock isn’t overbought or oversold.

Groupon stock has an upper Bollinger Band level of $32.57, while its lower Bollinger Band level is $19.44. On Tuesday, the stock closed near its middle Bollinger Band level of $26.01, which suggests that it’s neutral.

Groupon stock rose in the pre-market trading session today. The shares rose 3.4% in today’s trading session at 7:27 AM ET. Meanwhile, the S&P 500 futures surged 0.63%, while the Dow futures surged 0.71%. Read US Stock Markets: Will Nasdaq Hit All-Time Highs in June? to learn more.