Is Groupon Stock (GRPN) Finally A Buy – Investor Questions

One speculative stock I field a lot of questions about is Groupon Stock. The stock trades under the symbol GRPN. Recently a number of securities firms upgraded Groupon to a buy which did send the stock up from around $6.00 to $7.00 for a gain of 16%, but with so many investors holding stock at much higher prices many have written over the past few weeks asking the same question – Is Groupon Stock Finally A Buy.

Groupon Stock – What’s Wrong

When Groupon stock was first introduced to the stock market in November 2014, the stock jumped to an intraday high of $31.14. Surprisingly I have had a number of investors write me who still own stock at around $30, so they were the unlucky ones during the first couple of days because the stock has declined continuously since its IPO. The average price most investors are holding stock that have emailed to me are in around the $15.00 price and most do not want out, they simply want to break-even.

The problem for Groupon is there is no profit. It’s book value is around $1.00. However the company has next to no debt, 2.9 billion in revenue and a gross margin of about 52% all of which is impressive. They also have 669.3 million shares outstanding which means the chance of floating more issue is slim to nil and they have 11,283 employees. The company needs new management. No profit on 2.9 billion in revenue is ridiculous at best. This company also has too many employees and needs to get better management. This could be a powerhouse in the discount coupon business but only under new management who understand how to grow a business. Obviously all the above is my opinion.

Groupon Stock Technical Analysis

Technically over the last 6 months the stock looks like it has bottomed around the $5.50 level. You can see the last rally off of the upgrade to the stock however without those upgrades an investor must wonder whether the stock after the previous rally which ended in early August would have just kept falling.

Moneyflow shows us that the stock is overbought and starting to pullback.

The Accumulation-Distribution tool tells investors that distribution of stock has been heavy and only just recently did it pullback from heavier distribution although even after the recent pullback, distribution is still very strong. Most investors want out and other investors are simply trading the little rallies.

The Ultimate Oscillator shows the stock was also overbought in the last rally and it too is starting to fall as the overbought condition dissipates.

The Fast Stochastic has a sell signal on the stock.

Groupon Stock to Sept 4 2014 – Technical Analysis

Is GRPN Stock A Buy?

I don’t think Groupon Stock is a buy even at present prices, but I do think for investors holding shares and wanting to at least get their capital back, the present prices and option premiums allows for some creative option, stock combination trades to assist in getting their cost basis lower and move toward a break-even on the stock.

I like the January 2015 option premiums to start. Then once November arrives, I would move the trades out into April and then as February arrives I would move the April out to January 2016. That should assist in getting additional income back into investor pockets and helping to reduce the cost-basis for those investors still holding shares at much higher prices.

For investors who think the stock is finally a buy, I still think setting up credit call spreads is a better idea than just buying the stock and hoping it rises. I like a “sure thing” and the surest thing I have found is that if I am not prepared to control losses, they will mount.