What happened

Shares of online coupons site Groupon (GRPN 0.06%) are on a tear this morning, up a solid 47.9% as of 10:40 a.m. EDT after reporting a less-bad-than-expected second quarter of 2020 last night.

Analysts had predicted Groupon would lose $2.75 per share in its second quarter and do sales of barely $200 million in total. In fact, Groupon lost only $0.93 per share and did $395.6 million in sales -- nearly twice what analysts had predicted.  

Rising red stock arrow representing a stock going up drawn on a yellow background

Image source: Getty Images.

So what

Investors are naturally elated. But should they be? Yes, Q2 wasn't as horrible as expected for Groupon, but it was still pretty bad. A loss is still a loss.  

What's more, I'm not certain Groupon's "earnings beat" was as big as it's being made out to be. According to the company's earnings release, the $0.93 per share Groupon said it lost was a pro forma number, whereas the company's loss when calculated according to generally accepted accounting principles (GAAP) was still $2.53 per diluted share -- much closer to the number Wall Street had predicted.

Even Groupon's sales number may not be all it's cracked up to be. While nearly twice analyst forecasts, $395.6 million in reported sales still represented a 26% decline year over year.

Now what

Of course, it's also possible investors are focusing less on the losses Groupon reported in Q2, and looking instead to how the company might improve on those losses in the future. In the company's report, CEO Aaron Cooper emphasized how Groupon has "made meaningful progress toward stabilizing our business with the goal of returning Groupon to growth," in particular by "taking substantial costs out of our business." And management is planning to cut costs further, realizing "approximately $200 million in savings from our restructuring actions" in 2021, and ultimately, a total of $225 million in savings.

When you consider that Groupon has lost a total of $226 million over the last four reported quarters, that might be just enough cost-cutting to right the ship and allow Groupon to resume growing.