Does Groupon's Ticket Monster Sale Affect Shareholders?
Groupon Inc (NASDAQ: GRPN) on Monday announced that it would sell a majority stake of its South Korean Ticket Monster unit to a consortium that included private equity firm KKR. The deal more than triples Groupon's investment in Ticket Monster, which the company first bought for $260 million, but which will now be valued at $782 million. Alongside the sale, Groupon also announced a $300 million buyback program.
Brean Capital reiterated a Buy on Groupon with an $11 price target. Brean viewed the Ticket Monster divestiture as a positive for the company, noting that it removed an adjusted EBITDA-losing unit from the business. If Ticket Monster continues its high-paced growth, Groupon's 41 percent stake offers good upside to potential future profits. According to Brean, Groupon trades at a "meaningful discount" to its peers in the technology space, providing near-term opportunity for investors.
Morgan Stanley recommended investors remain on the sidelines, though the firm is "encouraged by the ongoing stability" in Groupon's North American business. The company's private channel checks indicated that there was acceleration in customer couponing in Q1. Despite that, the analysts view Groupon's ongoing couponing strategy to be "risky" and reduced their price target by $0.50 to $8.50.
Credit Suisse analysts also placed a Neutral rating on Groupon, with a $8 price target. While the analysts did incorporate the news into its model – both in reducing Groupon's revenue and incorporating the share buyback – the net result was no change to the firm's price target.
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|Jan 2017||RBC Capital||Upgrades||Underperform||Sector Perform|
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