Investing.com — Shares of Groupon Inc (NASDAQ:) is trading higher midday Wednesday, up nearly 7%, as both Wall Street analysts and some of its largest shareholders express strong support for the company.
Northland starts with Outperform and target price of $22
Today, analysts at Northland Capital Markets initiated coverage of Groupon with an Outperform rating and a $22 price target, implying an upside of more than 50% from current levels.
In their note, they cite “mounting evidence” that the company “is in the early stages of a successful turnaround,” namely GRPN’s “first year-over-year revenue growth in a decade,” as well as the early success of its latest initiatives, such as “improved performance marketing spend, a streamlined checkout process and higher-quality offerings.”
Northland highlights the strong potential of Groupon’s “future growth levers, such as a new app/website,” aimed “at driving better conversion of the company’s current approximately 24 million monthly visitors,” and expresses strong support for the company’s cost-cutting efforts that have already led to “selling, general and administrative expenses falling approximately 30% year-over-year for the past four consecutive quarters.”
Analysts attribute much of the improved performance to GRPN’s seasoned CEO Dusan Senkypl, brought on board in early 2023, who “made his fortune through multiple successful exits in e-commerce companies, both as a trader and investor.” They note that Senkypl’s compensation package is entirely dependent on Groupon’s stock performance, with “PSU price hurdles 40%, 118% and 370% above current prices.”
Based on the above, Northland analysts take a bullish stance on the company and see a scenario in which “GRPN’s multiple will expand rapidly.”
Activist investor Windward Management increases its stake
Windward Management, an activist fund run by Marc Chalfin, has been one of Groupon's most active defenders over the past year.
In its letter to investors published in 2023, the Florida-based asset manager was one of the first to publicly point out the disconnect between the company’s valuation at the time and its prospects with a strong management team. Windwards also acquired a stake in GRPN.
Today, the fund reiterated its confidence in the company by revealing an increase in its stake to 6.5% (from 5.1% previously).
Speaking exclusively to Investing.com, Marc Chalfin said: “Our increased stake underscores our growing conviction in Groupon's recovery prospects and our belief that the company is on the cusp of accelerating revenue growth, delivering strong EBITDA gains and generating significant free cash flow. We are pleased to see that leading analysts are beginning to share our view of the company.”
Fostering a positive feeling
The latest actions by its major shareholders and the increased attention the company is receiving among Wall Street analysts add to the growing positive sentiment surrounding Groupon.
Last month, Roth/MKM analysts praised the company's updated website for “a cleaner, more searchable design, more prominent promotion of gift options, and an improvement in its inventory of offerings (in terms of quality and average selling price).”
They now believe the potential for a positive surprise (in EBITDA and revenue figures) has increased, as they reiterate a Buy rating with a $28 price target.
Groupon shares are up nearly 7% midday Wednesday. If Windward and Northland are correct in their estimates, this is just the beginning.
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