In a year that has brought us an unbelievable range of emotions, 2016 delivered another oddity. Shares of Groupon Inc (NASDAQ:GRPN) returned a respectable profit of nearly 10%. Now, I’m sure that the almost 10,000-strong workforce of GRPN are not partying it up at their Chicago headquarters. Still, that’s the best news the coupon aggregator has seen in quite some time.
Let’s face the ugly facts straight up. Since going public in the closing months of 2011, GRPN stock has been nothing short of a money pit.
In its debut year, the average share price of Groupon was just under $22. This year, the average is a mere $3.55. That’s a stunning loss of 84%, leading many to call it quits.
InvestorPlace contributor James Brumley mentions GoPro Inc (NASDAQ:GPRO) when he stated that GRPN did not have “a prayer of living up to the hype.” You could just as easily put Twitter Inc. (NYSE:TWTR) into the mix.
All three showed early promise, only to succumb to rapid depressurization. Interestingly, it seems that tech companies that fall apart at the get-go — like Facebook Inc (NASDAQ:FB) — are better equipped for the long run.
But it’s not just the hefty losses in the markets. Brumley — our resident Groupon stock coroner — cites fundamental issues as well. Primarily, GRPN stock suffers chronic hemorrhaging of cash and other liquid assets. It’s also unprofitable considering its absolutely anemic revenue growth. Finally, the hacking incident a few weeks ago where user accounts were financially compromised did GRPN no favors.
The Other Side of the GRPN Divide
After reading these “pre-autopsy” reports, even I’m tempted to hightail it to more stable pastures. My job would be a lot easier picking off from the top ten S&P 500 companies. The problem, of course, is that the blue chips tend to be boring, and their pricing dynamics reflect that.
If you can handle the risk — and Groupon stock is plenty risky — you can potentially secure handsome profits. Best of all, you may not have to wait that long.
A great example is an article I wrote about GRPN stock last summer. This was at a time when seemingly everybody was against the company’s future prospects. Admittedly, the data was grim then as it is now.
But the one issue to key in on is the popularity of the Groupon business plan. I don’t know a single soul that wouldn’t want to save money, no matter how wealthy they are. That’s exactly what this organization taps into.
On July 5, 2016, Groupon stock closed at $3.25. Exactly one month later, GRPN was at $5.69, or a massive 75% gain.
Of course, the enthusiasm started to peter down shortly thereafter. It wasn’t a sudden swing and a miss, however. Rather, GRPN stock steadily declined, giving investors plenty of time to take some cash off the table.
Now, I’m not suggesting that these shares are something you set and forget like International Business Machines Corp. (NYSE:IBM) or Procter & Gamble Co (NYSE:PG). Rather, you buy when the opportunity is right. And an argument can be made that GRPN stock has hit its “sweet spot.”
Clearly, this isn’t a $20 per share company — I think we can all agree there. But it’s also not a penny stock, either. Even though subscriber growth and price per coupon metrics are down, GRPN is still attracting nearly 94 million unique visitors per month in the U.S. alone. Also, the average price per deal is $76.33. With e-commerce making strong gains in the tough retail sector, Groupon is another avenue for online businesses to supplement their momentum.
Bottom Line on GRPN Stock
If Groupon stock was as terrible of an investment as many have claimed it to be, there were plenty of opportunities for it to officially die. Yet here it is — struggling, sure, but definitely not dead.
Still, I do agree with the general tone of the prognosis. Groupon stock is only for those with an iron will and a short time horizon.
That said, there’s an ebb-and-flow pattern in development. Right now, GRPN stock is in its low tide. A bit of optimistic news could see it swing forward — if at least temporarily.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.