Barrington's Groupon Confusion: What's The Deal With Tmon?

In a report published Thursday, Barrington Research analysts maintained an Outperform rating on

, with a price target of $9, after the company reported its 1Q results. Groupon reported 1Q results broadly in-line with expectations. Global units stood at 54 million, representing 6 percent y/y growth, while active deals were over 425,000 globally. The company reported active customers at 48.1 million, (7 percent y/y growth) and average customer spend at $135 (down $20 sequentially). Groupon's share price has declined by 8 percent since then, since investors were unsure of how to interpret results due to "the post‐Tmon financials presentation and the significant currency impact," the Barrington Research report stated. A couple of weeks back, Groupon announced the Tmon deal. Groupon inked an agreement to sell controlling interest in Ticket Monster Korea (Tmon) to

and Anchor Equity Partners for $360 million in cash. Groupon will retain a 41 percent interest. The deal, expected to close in 2Q, values Tmon at $782 million, as compared to the price of $260 million that was paid to acquire the company in early 2014. "Management is continuing to explore alternatives for its ROW businesses and we think it makes sense to reduce these distractions from its core domestic and European businesses," the analysts said. Groupon is making progress in "its evolution from a daily‐deals email blaster into a marketplace reliant on non‐email channels" the analysts wrote, while adding, "We are cautiously optimistic that it will reaccelerate growth and profitability (on a FX‐neutral basis) by continuing to improve international operations as well as moving away from email to non‐email, increasing Goods' profitability, and increasing growth in domestic local."