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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Take Profits in These 2 Companies Before Earnings

Stocks in this article: DIS GRPN

GRPN Chart GRPN data by YCharts

Groupon operates as a local commerce marketplace that connects merchants to consumers by offering goods and services at a discount in North America and internationally. The company sends daily emails to its subscribers regarding discounted offers for goods and services that are targeted by location and personal preferences.

52-Week Range: $2.60 to $14.93

Price To Book: 5.2

Groupon is anticipated to give us a repeat of last year's performance in this year's first-quarter earnings after the market closes on Wednesday.

The consensus estimate is currently between a loss of 1 cent and a profit of 2 cents a share, depending on the source. In the first quarter of last year, Groupon's bottom-line per share was 2 cents. Estimates from analysts range from a low of losing 2 cents per share up to the highest estimate of a profit of 5 cents per share.

Analysts are more or less side-stepping this one like a politician dancing the Washington two-step. A hold can mean everything from "I want to rate it a sell but that wouldn't be good for business" to "I have no clue" -- 16 out of 24 analysts rate Groupon a hold. Three recommend this company as a buy and five recommend selling.

Unlike Disney, Groupon hasn't performed well for investors who bought before the second half of 2012. As a result of the stock's dismal performance, the previous CEO and founder, Andrew Mason, stepped down earlier this year. In what is one of the most memorable resignation letters I have ever read, Mason displayed a rare level of honesty and humility in the corporate world.


I find a bullish argument for Groupon elusive. While I'm not short and wouldn't short the company primarily out of takeover risk, it's anything but surprising to see short interest over 15% of the float. I am almost exclusively a short-seller, and I can say with confidence that shorts don't enjoy holding a short position with this much short interest.

In order for short-sellers to hold positions with a small-priced ticker, they require a high confidence level the company is significantly overvalued by investors.

In other words, the smartest minds are screaming at the top of their lungs that Groupon is overpriced. They could be wrong, but are usually spot on. GRPN Revenue Quarterly Chart GRPN Revenue Quarterly data by YCharts

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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