2023-09-30 04:49:58 ET
Groupon (NASDAQ: GRPN) stock price has staged a strong recovery recently, making it one of the best-performing e-commerce stocks. It has outperformed the likes of Stitch Fix, Amazon, and Etsy as its stock sits at the highest level since June 2022. It has surged by more than 424% from the lowest level this year.
Viability concerns remain
Groupon was one of the biggest e-commerce companies at its peak. At some point, the company turned down a $6 billion acquisition bid from Google. Today, the company has a market cap of over $417 million and a short interest of 31.12%.
Groupon has underperformed for a number of reasons. First, the company has over the years failed to attract many big national brands, hindering its growth. Second, Groupon has faced intense competition from the likes of Amazon and Walmart.
These two companies have created a huge moat, thanks to their Prime subscription services and quick delivery times. Most Amazon Prime subscribers would prefer shopping in Amazon since they have already paid an annual fee.
Further, Groupon’s annual revenue has been in a steady downward trend. It has moved from over $2.6 billion in 2018 to just $599 million in 2022. At the same time, the company has slashed its total marketing costs dramatically, hindering its reach.
Groupon stock price has recovered modestly as investors now bet on a turnaround. One of these is Windward Management, which boosted its stake in the company this week. In a statement, the fund said that it believes that Groupon’s share price can surge from the current $15 to $55.
The rally accelerated after the company published mixed results in August. Its revenue dropped by 15.7% YoY to $129.11 million, better than expected. Its total billings during the quarter came in at $1.7 billion while the number of visitor sessions per month rose to 80 million. It also expects to become cash flow positive in Q4.
Groupon stock price analysis
The daily chart shows that the GRPN share price has made a strong recovery recently as it surged from $2.94 in May to almost $16. This rebound happened after the company formed a falling wedge pattern.
The stock formed a golden cross pattern as the 200-day and 50-day moving averages made a bullish crossover. It has remained above these levels recently.
Groupon has also flipped the key resistance levels at $12.60 and $13.85 into supports. At the same time, the Relative Strength Index (RSI) is nearing the overbought level. Therefore, I believe that the stock will likely continue rising as buyers target the key psychological level at $20, ~33% above the current level.
The flip side is where the stock’s rally fades as investors start taking profits. If this happens, the stock will likely retreat to the key support at $10.
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