Why Groupon Shares Popped

Is this meaningful? Or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Sep 19, 2012 at 12:00AM
Other

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Groupon (Nasdaq: GRPN) climbed 10% today after the "daily deal" specialist launched a new payment service in the U.S.

So what: Groupon shares have been crushed over the past year on declining demand for daily deals, but today's foray into the mobile payments business potentially gives the company another source of explosive growth. The service will allow businesses to run credit cards using an iPhone or iPod Touch at, according to Groupon, "a lower rate than other providers," giving Wall Street plenty of good vibes over its ability to compete in the space.

Now what: I'd continue to be cautious about buying into the stock. While Groupon's new service will charge a lower rate than that of industry kings PayPal and Square, there's really no telling if or when the strategy will translate into profitable growth. When you couple that uncertainty with the worrisome sales trends at its main daily deal business, Groupon remains a particularly speculative selection.

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