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Why Groupon Stock Gained 25% in April

By Demitri Kalogeropoulos – May 7, 2020 at 12:38PM

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Shares remain sharply lower over the past year.

What happened

Groupon (GRPN 2.23%) shareholders outperformed a strong market last month. The stock gained 25% compared to a 13% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The broader trend has been lower, though, with shares down over 50% so far in 2020 compared to a 10% decline in the market.

A woman holding shopping bags.

Image source: Getty Images.

So what

The business was on a disappointing trend before COVID-19 paused most retailing activity, and that helps explain why shares dove in March. Investors edged back into the beaten-down stock last month as the economic outlook brightened amid unprecedented action by the Federal Reserve. Groupon also announced aggressive cost-cutting initiatives and a new shareholder rights plan to protect against unwanted takeovers.

Now what

Investors will learn just how badly its business has been impacted by the dramatic slump in local merchant traffic when Groupon announces first-quarter results sometime in May.

Meanwhile, it faces related challenges including a potential delisting from the Nasdaq index as its price hovers around the $1 per share mark. These risks are just two of the biggest reasons why investors should be cautious about expecting a sustained rebound in this tech stock.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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