Market May Seize On Any Upside In Groupon Q2 Results

Buzz has it that any upside in Groupon's (NASDAQ: GRPN) second-quarter report Tuesday may get seized on by investors and potentially drive the shares higher.

With short interest now at 16 million of Groupon's 679 million shares outstanding, a squeeze could contribute to any short-term run-up.

Investors on Monday acquired about 97,000 call options on Groupon, the most since February according to Bloomberg. The activity suggests bets are on that Groupon will offer an upside surprise.

Some of the calls may represent hedging by shorts, Trader Alert analyst Fred Ruffy told Bloomberg.

Shares are down a whopping 41 percent year to date, but the company recently appeared to be gaining traction with its goal of building the leading local deal marketplace in contrast with its original focus of offering coupons from various retailers via email.

Piper Jaffray's Gene Munster recently forecast a 30 percent growth rate for the category over the next several years.

The company expects double-digit growth for the segment starting in the second half of 2014.

"That could help push the stock back into the double digits," Wunderlich's Blake T. Harper said, maintaining a Buy rating.

Continued growth in its core operation “ultimately won't be rewarded by the market,” Harper said, given the businesses' “undifferentiated, ultra-competitive” nature and its low margins.

Analysts on average are expecting profits of $0.01 per share on revenue of $761.8 million.

Groupon traded recently at $6.86, down 2.35 percent.