Groupon stock price has become overbought: is it a buy?

Groupon stock price has staged a strong comeback since 2023 as the e-commerce company’s turnaround efforts started to show results. It has soared in the last six consecutive weeks, moving to a high of $33.90, its highest point since August 2021. 

GRPN stock has jumped by over 967% from its lowest level in 2023, bringing its market capitalization to over $1.46 billion. This article explores why the GRPN share price has jumped and whether it has more room left. 

Why Groupon stock price has surged

Groupon is an e-commerce company that focuses on local deals. Launched in 2008, it became a well-known brand, and it rejected a $6 billion offer from Google, which it believed undervalued its business.

Google believed that Groupon would evolve into a large e-commerce player like Amazon and eBay. This, however, did not happen, as Groupon’s business and market capitalization deteriorated.

Groupon’s annual revenue has been in a free fall as customers shifted to other companies like Walmart and Amazon that offer exciting subscription services. It has moved from $1.416 billion in 2020 to $492 million last year. 

The decline was also because the company reduced its sales and marketing budget in the past few years. 

Recently, however, the Groupon stock price has rebounded as the company has continued its turnaround efforts under Dusan Senkypl, who became the Chief Executive Officer three years ago. 

Senkypl has focused on changing managing the company’s costs, including through layoffs. It laid off 500 employees in 2023 in a bid to lower costs and reduce its losses 

He has also shifted how the company spends its marketing budget. For example, the company recently increased content on a social media platform and is seeing a high return on investment. Specifically, the company is moving from customer acquisition to customer lifeline value. 

Further, the company streamlined its business by moving most of its operations to the cloud. This, in turn, led to higher operational efficiency and scalability. He has also increased the focus to hyperlocal transactions.

Long road to recovery

Groupon has a long road to recovery as its sales are still falling. The most recent results showed that its revenue dropped by 5% to $117.2 million in the first quarter, with its local revenue falling by 3% to $108.4 million. 

Groupon’s gross billings dropped by 1%, while its unit sales dropped by 17% to 8.5 million. 

The stock rose mainly because the company’s active customers grew a bit, reaching 15.5 million. It also rose as analysts predicted that the company would resume its growth in the next few years.

The annual revenue is expected to come in at $500 million this year, a 1.45% increase from a year earlier. Analysts also anticipate the revenue to rise by 7.3% next year to $536 million. 

They also expect that its business will become profitable, with the earnings per share (EPS) coming in at 25 $0.04 and $0.22 in 2025 and 2026.

Groupon share price analysis

The weekly chart shows that the GRPN share price has bounced back in the past few years. It rose from a low of $3.17 in 2023 to the current $33.89, as we predicted here.

Groupon stock has flipped the important resistance at $19.32 into a support level. It also formed a golden cross pattern as the 50-week and 200-week moving averages crossed each other. 

However, there are signs that the GRPN stock price has become highly overbought as the Relative Strength Index (RSI) has moved to 80. Therefore, the Groupon stock price will likely pull back and retest the support at $20.