Macquarie Upgrades Groupon To Outperform, Sees 'Compelling' Valuation

In a report published Monday, Macquarie analyst Tom White upgraded the rating on

from Neutral to Outperform, while reducing the price target from $7.75 to $7, following the recent pullback in shares. GRPN shares have slipped by 29 percent since the company reported its 1Q earnings, versus a 1 percent decline in the S&P during the same period. Analyst Tom White pointed out that even as the shares slid, the company's fundamentals "were largely stable." Moreover, Groupon benefited from stronger a "cash/asset position" after closing the TMON transaction on May 27 and has a low/mid-20 percent EBITDA growth profile. White said that Groupon was a "growth company trading at a no-growth multiple" and that its valuation gave investors an opportunity to "buy a growth company at what is effectively a "no-growth" multiple." In the report Macquarie noted, "We harbor some concerns around the awareness/strength of the "demand-side" of GRPN's new marketplace, but the fragmented nature of local means executing this vision will take time and we've seen nothing intra-quarter suggesting GRPN's near-term trends are deteriorating." The adjusted EBITDA estimate for 2016 has been reduced from $433 million to $407 million to reflect "more conservative out-year Local take-rate and op ex assumptions."