Groupon, Inc. (GRPN) shares fell more than 10% in early trading on Wednesday after the company reported worse-than-expected fourth quarter financial results. Revenue fell 3.5% to $873.17 million – beating consensus estimates by $20.36 million – but net income of seven cents per share missed consensus estimates by two cents per share. Management’s EBITDA guidance for the full year also fell short of consensus analyst estimates.
Despite concerns about falling revenue and rising market expenses, Piper Jaffray analyst Sam Kemp believes that lower-than-expected North American local billing growth is largely due to accounting headwinds. The analyst also believes that the 2018 guidance factors in a significant ramp-up in international marketing, while noting that management may be conservative. Piper Jaffray maintains its price target of $6.25 per share on Groupon stock. (See also: Groupon, Grubhub Shares Climb on Partnership.)
From a technical standpoint, the stock broke down from lower trendline and S1 support levels at $4.94 to S2 support levels just above the 200-day moving average at $4.59. The relative strength index (RSI) fell to 32.22, nearing oversold levels, but the moving average convergence divergence (MACD) accelerated its bearish downtrend. Despite the initial bearish reaction, the market may still be taking the time to digest the fourth quarter financial results.
Traders should watch for a close below trendline and S1 support levels that would confirm a breakdown. There could be some strong support near S2 support and 200-day moving average levels, which could be a good buying opportunity for short-term trades. If the stock closes above the S1 and trendline support levels, traders should watch for a breakout toward the pivot point and 50-day moving average at $5.32 on the upside. (For more, see: Groupon Stock: How Long Can Rally Last?)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.