Why Groupon Has Low Expectations Heading Into Earnings Season

• Groupon Inc GRPN shares have been treading a downward path in 2015 and are down 58 percent year-to-date.
• Brean Capital’s Tom Forte maintained a Buy rating on the company, with a price target of $8.
• A strong US dollar and tough comps are expected to restrict the company’s 3Q performance, Forte said.

Analyst Tom Forte mentioned that Groupon’s 3Q results are expected to be modest in the wake of tough comps for North American daily deal billings growth, persistent strength of the US dollar and the late September exit from some international markets.

Forte believes, however, that the impact of these factors is already priced into the stock at the current levels. “The stock currently trades at a meaningful discount to its enabling technology peers on a forward P/E and EV/EBITDA basis,” he explained.

Groupon is scheduled to report its 3Q results on November 3. It is expected to report sales of $712 million, representing a 5.9 percent decline from the year-ago level, which included sales from Ticket Monster.

The strong US dollar seemed to have a significant negative impact on Groupon’s latest quarter results. The company is likely to report adjusted EBIDA of $39 million, versus management’s guidance of $45-$65 million, Forte said.

Groupon’s future growth is likely to be driven by various initiatives like coupons, market rate inventory, pages and real-time inventory.