Why Groupon Shares Surged


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of "daily deal" specialist Groupon (NAS: GRPN) soared 19% on Tuesday after its quarterly revenue easily topped Wall Street expectations.

So what: The stock has been crushed in recent months on concerns over slowing growth, but a huge top-line beat -- revenue soared 89% to $559.3 million versus the consensus of $530.5 million -- is quickly easing some of those fears. Of course, with about half of Groupon's public float being shorted, today's rally is certainly being enhanced by nervous bears scrambling to cover their positions all at once.

Now what: Management now sees second-quarter revenue of $550 million-$590 million, representing a jump of 40%-50% from the year-ago period. "We are pleased to report a record quarter that demonstrates our progress in unlocking the opportunity in local commerce for merchants and customers worldwide," CEO Andrew Mason said in a statement. But while today's results serve as a nice short-term boost to the stock, the continuing trend of slowing active customer additions, slowing international sales, and slowing sequential revenue growth are good reasons to remain cautious about Groupon's long-term prospects.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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