What happened
Shares of Groupon (GRPN +4.01%) were up as much as 7.5% on Tuesday as the company continues to follow the broad movements of reopening stocks. As of 2:58 p.m. EDT the stock is up 7.1% on the day.
Image source: Getty Images.
So what
Groupon didn't release any news today, so it looks like this big jump came because of the stock's correlation to other reopening companies like airlines. On Monday, fears of the coronavirus delta variant caused stocks associated with the reopening of the U.S. economy to tumble. However, on Tuesday many of these companies, including Groupon, recovered most of if not all of their recent losses.
Groupon may not seem like a typical reopening stock, but ever since the vaccine approvals back in late 2020, members of the financial media have grouped the stock with the airlines and cruises. This has caused the stock to soar over the last year. At one point, shares of Groupon were up over 70% just this year after Jim Cramer recommended it on CNBC.
Now what
Even though investors and the media seem to have a renewed interest in Groupon, it doesn't mean the business is doing any better. Revenue has been in steady decline since 2017, prior to the COVID-19 pandemic, and there's no reason to think Groupon's business will recover once it goes away. It has also never consistently generated any profits, which it will have to do at some point in order to justify its $1 billion market capitalization. Taking all these factors into consideration, investing in Groupon stock looks mighty risky at the moment for anyone thinking of holding for the long term.
