Prescience Point Says Groupon 'Wrongly Left For Dead,' Sees 300% Upside Potential

Groupon Inc GRPN shares traded higher by 8.2% on Tuesday after Prescience Point Capital Management released a new report on the stock and said it is significantly undervalued.

Groupon Bull Thesis: Groupon shares are down 65% in the past five years, but Prescience Point said the stock has been “wrongly left for dead” and Wall Street is mostly ignoring the true value in the name.

Related Link: 10 Weirdest TV Commercials Of All Time

“Market participants have completely overlooked the sizable and growing value of Groupon’s investment in SumUp, and are significantly undervaluing the Company’s core business, which has recently stabilized and is poised for significant growth,” Prescience Point said.

Prescience Point estimate’s Groupon’s stake in SumUp alone is worth about $268 million, or about 40% of Groupon’s current enterprise value. After removing the value associated with SumUp, Prescience Point said the market is valuing Groupon’s core business at only around 2.9 times consensus fiscal 2022 EBITDA estimates, suggesting significant valuation upside.

Prescience Point argued that the long-standing Groupon bear thesis that the company’s business is a melting ice cube is not supported by its recent data. Groupon still has about 24 million customers, 15 million of which have used the platform for at least three years and are among the company’s most active users, Prescience Point said in the report.

In addition, the firm argued that accounting changes recognizing Goods revenue on a net basis rather than a gross basis make Groupon’s recent revenue numbers appear a lot more bleak at first glance than they actually are.

Coverage And Price Target: Finally, Prescience Point said the number of analysts covering Groupon stock has dropped from nine in 2018 to just two today, highlighting just how much Wall Street is overlooking the stock.

Based on a sum-of-the parts analysis, Prescience Point said Groupon shares are worth at least $63.18 today, more than double the stock’s current price. In a bull-case scenario for SumUp, Prescience Point said Groupon could be worth more than $98 per share, more than 300% upside from Monday’s closing price.

Benzinga’s Take: If Prescience Point is correct in its analysis of Groupon’s accounting changes, the company has the potential to take Wall Street by surprise with its revenue growth numbers in coming quarters. At this point, Groupon needs some kind of catalyst to jump-start the stock and get investors buzzing about a potential bull thesis once again.