Call Options Or Put Options On Groupon (GRPN)?
Groupon (GRPN) is the leading online, local commerce marketplace – which connects merchants to consumers by offering goods and services at a discount. It’s basically an online deal site. And, it’s very likely that you or someone you know has used a “groupon” before.
GRPN’s currently trading for $6.89 per share, and has risen 42% year to date. The shares are up an impressive 165% off the 52-week low of $2.60, but, they’re still down 54% from the 52-week high of $14.93.
Is this an opportunity to buy call options on GRPN after the company announced the expansion of its point-of-sale product? Or should you buy put options on GRPN because of the many hurdles the company has faced since it’s been public?
The bulls make a convincing argument…
GRPN is putting on the full court press with their recent expansion of their point-of-sale product, called Breadcrumb. It’s basically an app that serves as a cash register and credit card taker on an iPad.
Breadcrumb is designed for small businesses who engage in lots of transactions – think coffee shops, salons, and other retail merchants. It’s a huge market, and Groupon is already a well recognized name.
The major competitor in this space, Square, is a private company. As such, GRPN is currently the best way (and perhaps the only way) to invest in the new wave of point-of-sale technology.
And keep in mind, GRPN also beat expectations in the most recent quarter. The company seems to be headed in the right direction. And, the expansion in the point-of-sale market can only help the company’s growth.
But the bears have a compelling case as well…
GRPN’s troubles are well documented. The stock went through a very hyped IPO in 2011 only to see the share price drop over 80% from the IPO price. The company posted several quarters of disappointing results.
Part of the problem, Groupon’s main business became something of a fad – and quickly faded in popularity. Both businesses and consumers questioned the effectiveness of Groupon’s business model and product offerings. Plus, there are basically no barriers to entry. Competition quickly became intense.
Finally, GRPN may be the easiest way to invest in the new point-of-sale technology, but Square already has a large foothold in the space. Only time will tell if GRPN can be as successful as Square. But, there are a lot of “ifs” left for management to figure out.
Is GRPN’s expansion of Breadcrumb enough to overcome several disappointing quarters?
If you think the bulls are right, take a look at buying the GRPN July $7.00 calls for around $0.60.
If you think the bears are right, take a look at buying the GRPN July $7.00 puts for around $0.75.
Yours in Profit,
Gordon Lewis
Category: Call Or Put Options?
