Groupon, Inc.

Groupon, Inc. (NASDAQ: GRPN) acts as the middleman between consumers and merchants, offering a variety of products and services at discounts via its online store. It offers consumers daily deals (in the form of online vouchers) from local merchants. 

Key Updates:

• Decline in top-line: In FY21, the company reported its total revenue of USD 967.1 million, significantly lower than USD 1,416.8 million in FY20. The decline was primarily due to a considerably lower product income of USD 172.3 million in FY21, as compared to USD 773.2 million in FY20.
• Increase in cash used in operations: The company reported a higher cash used in operating activities of USD 123.9 million in FY21, which is higher than the cash used of USD 63.5 million in FY20. Additionally, the group reported its cash from operations of USD 71.2 million in FY19. This indicates poor operating performance, and hence, continuation of the above trend might lead to liquidity crisis.
• Higher D/E ratio: At the end of FY21, the company reported its D/E ratio of 1.54x, significantly higher than to the industry median of 0.13x. This might lead to lower financial flexibility and higher interest costs.

Stock Recommendation:

The company reported its current ratio of 0.93x on NTM basis in FY21, as compared to the industry median of 1.70x. This indicates poor working capital management and might lead to liquidity crunch. The stock tumbled ~56% and ~66% in the last nine months and one year, respectively and closed below its 50-days and 100-days simple moving averages, indicating a bearish pattern. The GRPN stock is available at a price to earnings multiples of 16.2x on TTM basis, as compared to the industry (Consumer Cyclicals) median of 7.4x. Hence, considering the aforesaid facts, we give a ‘Watch’ stance on the stock of GRPN at the closing price of USD 19.36 as of March 16, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

1-Year Technical Price Chart (as on March 16, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Note: Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.