Goldman Dumps Groupon, Says International Headwinds Threaten Bottom Line

Groupon Inc GRPN is down nearly 20% year to date, and Goldman Sachs sees no near-term relief.

The Rating

Analysts Michael Ng and Alberto Him downgraded Groupon to Sell and cut their price target from $3.20 to $2.40.

The Thesis

Over the last few years, Groupon pumped significant investment into customer experience to relieve pressure on its voucher program. Among other things, it rolled out a mobile app, expanded supply and linked offers to certain cards. In spite of these efforts, Groupon bled customers for seven consecutive quarters, and 2019 brought the company’s worst ever active-customer declines.

“North America continues to experience traffic headwinds, which should result in ongoing North America revenue, billings, and gross profit declines in 2020/21,” Ng and Him wrote in a report.

The downside compounds a negative inflection in international sales, which has historically boasted quarter-over-quarter growth.

“Against the backdrop of continued macroeconomic challenges (e.g., Brexit), we expect international challenges to persist,” Ng and Him wrote.

The analysts anticipate an 8% decline in shares through 2020, even as peers predict an 11% rise.

Price Action

At time of publication, Groupon shares traded down 6.6% at $2.46.

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Photo credit: Rusty Clark ~ 100K Photos, Flickr

Posted In: Alberto HimGoldman SachsMichael NGAnalyst ColorShort IdeasDowngradesPrice TargetAnalyst RatingsTrading Ideas