Groupon (GRPN) Stock Is Up Today on Hedge Fund Comments

NEW YORK (TheStreet) -- Shares of Groupon (GRPN) were gaining 8.5% to $7.80 with heavy trading volume on Thursday, continuing gains from Wednesday when Leon Cooperman, CEO of the hedge fund Omega Advisors commented on the stock.

About 21.9 million shares of Groupon traded hands as of 12:45 p.m. Thursday, above the average daily trading volume of about 15.9 million shares.

On Wednesday Cooperman told CNBC that shares of Groupon seemed "mispriced." The hedge fund CEO said shares of Groupon are worth 40% to 50% more than their current price, which helped bring up the price of the stock.

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Cooperman's Omega Advisors bought an 8.8 million share stake in Groupon in the third quarter.

TheStreet Ratings team rates GROUPON INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate GROUPON INC (GRPN) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 722.0% when compared to the same quarter one year ago, falling from -$2.58 million to -$21.21 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, GROUPON INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • GROUPON INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GROUPON INC reported poor results of -$0.14 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.14).
  • This stock's share value has moved by only 28.41% over the past year. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for GROUPON INC is rather high; currently it is at 55.25%. Regardless of GRPN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.80% trails the industry average.
  • You can view the full analysis from the report here: GRPN Ratings Report

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