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Forte: Groupon Needs To 'Accelerate' Its Buybacks

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Forte: Groupon Needs To 'Accelerate' Its Buybacks
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Tom Forte at Brean Capital said that Groupon Inc (NASDAQ: GRPN)'s earnings report offered "a mixed bag, with a little of everything." However, when looking at the company as a whole, Forte found value – revising the 12-month price target to $8 from $11, but reiterating the company as a Buy.

The lower price target corresponds to lower estimates from management, which in the near term was "reasonable." However, Forte said that management's long-term estimates, particularly as it relates to EBITDA, was "disappointing." The highlights from the call were the company's reiteration of full-year sales guidance and expectation of double-digit North American billings growth in Q3.

Brean's conclusion? It's "time to accelerate repurchase activity."

At present, Groupon has $461 million remaining on authorized repurchases, after buying back $91.5 million on the quarter. With shares down nearly 47 percent from its February high, it's time for the company to start supporting the stock. Forte argued that at current levels, the company needs to "prevent the shares from unraveling further."

In Brean's model, Forte decreased the adjusted EBITDA forecast, but maintained the long-term adjusted EBITDA margin of 17 percent. That compares to a margin of just 7.9 percent in 2014.

Year-to-date, Groupon has declined 46 percent. From a historical perspective, the company trades above its all-time low of $2.76, though well below its IPO highs, which were above $26. An $8 price target would be 81 percent above Friday's closing price at $4.43.

Latest Ratings for GRPN

DateFirmActionFromTo
Jul 2017Bank of AmericaReinstatesUnderperformUnderperform
Jun 2017B. RileyUpgradesNeutralBuy
Apr 2017Morgan StanleyDowngradesUnderweight

View More Analyst Ratings for GRPN
View the Latest Analyst Ratings

Posted-In: Brean CapitalAnalyst Color Long Ideas Reiteration Buybacks Analyst Ratings Movers Trading Ideas Best of Benzinga

 

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