Call it perspective, or call it a bloodbath. But while the general market has indeed had its fair share of woes so far this year, with the S&P 500 currently sitting nearly 6% in the red since the start of January, Groupon (GRPN) stock has put that pain to shame.
Since the year kicked off, the value of GRPN stock has been sliced in half. At one point today alone, shares of Groupon suffered a slide of more than 3%. That puts the stock right around $4 — below its short- and long-term moving averages and barely more than one-fifth of the initial $20 price it went to market with back in 2011.
The catalyst for today’s downward movement? Job cuts. Groupon announced that it is reorganizing its international operations to the tune of a 10% workforce reduction — a total of 1,100 global jobs.
From a financial perspective, this will translate to pre-tax charges of about $35 million, with somewhere between $22 million and $24 million of that coming in the current quarter. Results for the period are slated to be released in late October or early November.
In the near term, those charges could add insult to injury.
Exchange Rates Sting Groupon Stock
International operations have been weighing on Groupon stock of late thanks to unfavorable foreign exchange rates. In the most recent quarter, for instance, GRPN suffered a $28.3 million impact — a decent chunk of the company’s $738.4 million in quarterly sales.
Groupon noted that the headwind wasn’t about to stop blowing either — it expects to suffer 600 basis points of unfavorable exchanges for both the third quarter and full year.
The difference with these restructuring charges, at least in theory, is that it’s short-term damage with long-term turnaround potential. Foreign currency exchange is just a headwind with nothing to add but a potentially lower year-over-year bar to compare later results to.
With that in mind, there’s a split second where Groupon stock looks like a potential daily deal of its own. While sales are supposed to be flat this year, they are on tap to grow by 11% next year. The company is slated for 29% earnings next year too … on top of this year’s 75% expansion.
Average it out and you get long-term earnings growth of 21%, which is almost in line with the current multiple of 22.
That’s the angel on my shoulder talking. But take another step back, and the devil takes over again.
Groupon isn’t the kind of company you want to be making a value bet on. The tech star skyrocketed to the top at the front end of the cluttered inbox megatrend and has since tried to transition away — which essentially means Groupon stock is droppings its main differentiator to play in a crowded space.
For proof, just considering the company’s earnings miss in the most recent quarter, or the consistently shrinking consensus estimates, or the nearly 20% of shares held short.
Sure, with a lot of damage already done, there’s a chance that the slightest whiff of good news could have some traders thinking they found a bargain — and some short selling rushing to cover as a result.
But for the most part, Groupon stock remains a sinking tech ship that’s best avoided.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.