Why E-Commerce Marketplace Groupon's Shares Are Surging Today

Roth MKM analyst Sean McGowan initiated coverage on Groupon Inc GRPN with a Buy rating and price target of $30.

The analyst expects the company to witness higher demand amid high inflation and growing signs of recession. 

McGowan also expects cost savings, increased gross margins, and strong cash flow to drive valuation further.

The analyst highlighted the company's cost reduction initiative of saving over $250 million and focusing more on profits than sales growth. 

McGowan notes that the company has not repurchased shares since Q4 2019, despite a share repurchase authorization of $245 million, and assumes buybacks will begin in mid-2024.

The analyst estimates revenue of $549.2 million (vs. consensus: $511.0 million), adjusted EBITDA of $83.6 million (vs. $45.2 million street view), and Free Cash Flow of $(21.2) million vs. consensus of $(35.6) million for FY23.

Also, McGowan sees revenue of $602.4 million (vs. consensus: $524.1 million), adjusted EBITDA of $120.1 million (vs. $99.4 million street view), and Free Cash Flow of $125.5 million vs. consensus of $(40.3) million for FY24.

Groupon stock lost close to 13% last week. According to a recent regulatory filing, Groupon entered into a Share Purchase Agreement under which it has agreed to sell shares representing approximately 9.4% of its approximate 2.3% interest in SumUp Holdings S.à r.l., a private limited liability company, incorporated under the laws of the Grand Duchy of Luxembourg, to other investors in SumUp for an aggregate cash purchase price of €8.4 million.

As per the filing, the company is continuing to evaluate opportunities to monetize certain non-core assets, including some or all of its remaining stake in SumUp, its ownership of GiftCloud, and its portfolio of intellectual property.

GRPN intends to release its third quarter 2023 financial results after the close of market trading on November 9, 2023.

Price Action: GRPN shares are up 16.2% at $12.72 on the last check Friday.