We came across a bullish thesis on Groupon, Inc. (GRPN) on wallstreetbets Subreddit page by MacawGiganticus. In this article, we will summarize the bulls’ thesis on GRPN. Groupon, Inc. (GRPN)’s share was trading at $10.33 as of Nov 1st. GRPN’s forward P/E was 13.77 according to Yahoo Finance.
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Groupon presents a compelling case for potential upside, despite prevailing negative sentiment, with short interest at 44.03% of its float. This high level of short interest reflects low investor confidence and an expectation of decline; however, it also creates the possibility for a short squeeze if the company surprises with positive results. Interestingly, Groupon’s Q3 traffic grew by 2.9% year-over-year, marking a potential shift in trends despite lingering IT issues. The slight traffic increase from 69.4 million last year to 71.4 million in Q3/24 is noteworthy, as the company has been battling a steep revenue decline and had been teetering on the edge of collapse just a few quarters back. Although the IT complexities persist, the stabilizing or modest growth in traffic may suggest that management’s optimistic projections could be achievable, signaling a potential turnaround.
Further reinforcing this possibility, Groupon has rolled out a new frontend across its U.S. platform, having already observed positive conversion rates in an initial test sample. This upgrade, aimed at improving user experience, is expected to lead to higher conversions and, consequently, boost revenue. While a dramatic turnaround might be unlikely, management appears to be making steady progress in executing their plan to stabilize cash flow and potentially reverse the long-term decline in traffic. Currently priced at $10.33 per share and with an expected EBITDA of $60–80 million, Groupon’s EBITDA multiple of 5.1–6.8 is low. If the company meets or slightly exceeds its high-end projections and targets 5–10% revenue growth next year, the current share price becomes even more attractive, setting the stage for a significant revaluation. An expansion of the EBITDA multiple to 10–15x, combined with organic EBITDA growth, could further drive up the stock price within a 1–2 year timeframe.
In the short term, positive developments may also create upward pressure on short sellers to close their positions, potentially triggering a short squeeze. With stabilizing traffic, anticipated revenue gains from the new frontend, and an attractively low EBITDA multiple, Groupon could be positioned for an unexpected recovery, contrasting sharply with the market’s current expectations. Positive results would likely put substantial pressure on short sellers, leading to a rapid increase in share price and creating a uniquely favorable risk-reward setup for both short-term and long-term investors.
Groupon, Inc. (GRPN) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held GRPN at the end of the second quarter which was 20 in the previous quarter. While we acknowledge the risk and potential of GRPN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GRPN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.