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Forte On Groupon: Turn The Volume Up To $11

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Forte On Groupon: Turn The Volume Up To $11

In a report published Friday, Brean Capital analyst Tom Forte maintained a Buy rating and price target of $11 on Groupon Inc (NASDAQ: GRPN). The analyst attributes the 42 percent decline in the share price since late February to a “buyer’s strike.”

3 Reasons To Buy Groupon

Forte believes, however, that there are factors that make the stock an attractive buying option. The first reason, according to Brean Capital is “the potential for sustained North-American daily deal growth despite a tough comparison in 2H15.”

In addition, Groupon might be able to diversify its product portfolio through its restaurant delivery initiatives. The third reason is the stock valuation. Some volatility can be expected in the shares following the company’s 2Q15 earnings report, scheduled for next Friday.

Related Link: Groupon Bought A Startup That Once Revolutionized An Industry

2Q15 Results Preview

Forte expects Groupon to report its 2Q15 revenues at the midpoint of the guidance range, slightly below the consensus forecast and representing a 2.3 percent year-on-year decline. The revenue was affected by the exclusion of Ticket Monster, following the divestiture of Groupon’s majority stake in the business, as well as by the negative impact of the strong U.S. dollar.

The 2Q15 adjusted EBITDA is expected to come in at the lower end of the company’s guidance range, meaningfully below consensus. However, “the potentially damaging effects of the strong US dollar are already reflected in Groupon’s current share price,” Forte added.

Others Disagree

In a report published July 13, Morgan Stanley analyst Dean J Prissman maintained an Equal-weight rating on Groupon, while lowering the price target to $5.30, based on more conservative long-term expectations from the company.

“While we acknowledge that Groupon's negative working capital cycle affords the company financial flexibility; we don't see it as a material lever which can be used to enhance shareholder value,” Prissman had stated.

According to the Morgan Stanley report, couponing is unlikely to prove to be viable or sustainable growth strategy, with the local daily deals market having reached maturity fairly quickly.

Hold Sentiment Echoed Much Earlier

In a report published June 22, Topeka Capital analyst Blake T. Harper initiated coverage of Groupon with a Hold rating and price target of $6. Harper believed that the company had “failed to drive sustained upside to revenues and earnings that would cause investors to revalue the stock higher.”

The analyst believed that while the stock represented good value, it needed to overcome Groupon’s “inconsistent execution and tepid growth.”

Latest Ratings for GRPN

DateFirmActionFromTo
Nov 2019DowngradesNeutralUnderweight
Feb 2019Initiates Coverage OnNeutral
Sep 2018Initiates Coverage OnNeutral

View More Analyst Ratings for GRPN
View the Latest Analyst Ratings

Posted-In: Brean Capital Morgan Stanley Topeka Capital MarketsAnalyst Color Long Ideas Reiteration Analyst Ratings Trading Ideas Best of Benzinga

 

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