Groupon Earnings Turnaround Drives a Short Seller Frenzy

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Groupon Inc. (NASDAQ: GRPN) has seemingly been down and out for long enough that many investors have either written off the company or forgotten about the daily deals and discounting website. Well, maybe this is a sign that Groupon’s turnaround is actually real. Its stock did not just jump higher after earnings — its stock price rocketed higher, and short sellers may be adding to this frenzy.

Groupon’s quarterly earnings for the period ending June 30, 2016 posted a net loss of 10 cents per share, but that adjusted net loss was $0.01. While earnings beat expectations, the revenue of $756.0 million beat expectations of just about $711 million. Thomson Reuters had estimates for earnings at −$0.02 per share.

The company’s earnings release further said that it posted gross billings of $1.49 billion and its adjusted EBITDA was $34.0 million. Cash and cash equivalents was $780.1 million, and Groupon had no outstanding borrowings under its revolving credit facility.

Groupon now sees fiscal year 2016 revenues coming in a range of $3.0 billion to $3.1 billion, followed by adjusted EBITDA guidance of $140 million to $165 million for the year. Thomson Reuters was calling for revenue to just be $3.02 billion.

For the trailing 12-month period, Groupon showed operating cash flow of $112.1 million and free cash flow of $32.5 million.

Basic data was noted as follows:

  • Gross Billings of $1.49 billion were down 2% from $1.53 billion in the second quarter 2015, with no significant impact of changes in foreign exchange rates.
  • Revenue of $756.0 million was compared to $738.4 million in the second quarter 2015, and the 2% global gain would have been 3% excluding the unfavorable impact from year-over-year changes in foreign exchange rates.
  • Gross profit was $333.6 million in the second quarter 2016, compared with $337.0 million in the second quarter 2015 — but it would have been flat outside of foreign exchange.
  • Its net loss from continuing operations was $51.7 million in the second quarter 2016, versus $15.3 in the second quarter 2015.
  • Global units declined 4% from a year ago to 51 million, but that was primarily driven by country exits and restructuring efforts in international segments. Units in North America increased 6%.

Groupon CEO Rich Williams said:

We continued to see strong traction in customer acquisition as we added more than 1 million new customers — the most in more than two years. We’re excited with the progress of our marketing programs to date and their effectiveness in introducing millions more people to our marketplace.

As far as the short interest, this latest July 15 reading had a short interest of 52.6 million shares. That is way down from the old level of almost 70 million to 90 million shares short being normal in 2015. Still, it is massive considering the average daily volume is now only about 5 million shares.

Groupon shares closed down 3.3% at $3.78 ahead of earnings, but the after-hours move was up 24% to $4.70. Its 52-week range is $2.15 to $5.28, and the market cap ahead of the report was right at $2.2 billion. Groupon had a $4.20 consensus analyst price target ahead of earnings.