On Wednesday, Northland initiated coverage on Groupon, Inc. (NASDAQ: NASDAQ:GRPN) stock with an Outperform rating and a price target of $22.00. The firm's positive outlook is based on the recent signs of a potentially successful turnaround under the leadership of the new CEO, Dušan Šenkypl, who took the helm in the second quarter of 2023.
Groupon's first quarter of 2024 marked the company's first year-over-year revenue growth in ten years, coupled with a notable $25 million improvement in EBITDA. This financial rebound is seen as an early indicator of the company's resurgence after a prolonged period of challenges and unsuccessful turnaround attempts.
The firm believes that Groupon has additional growth levers to pull and a sustainable cost base that can drive further financial improvement. Northland's confidence in the company's trajectory is also bolstered by the CEO's significant stake, with his fund owning 23% of Groupon's shares.
Šenkypl's performance share units (PSUs) are another sign of his commitment to the company's success, as they are tied to price hurdles approximately four times above the current share prices. This alignment with shareholder interests is seen as a positive factor in the company's potential for continued recovery and growth.
The set price target of $22.00 reflects Northland's anticipation of Groupon's continued progress under its new leadership. With the company showing signs of a turnaround, the market will be watching closely to see if Groupon can maintain its momentum and achieve the growth that Northland expects.
In other recent news, Groupon has been the subject of various developments. The company reported modest 1% year-over-year growth in the first quarter of 2024, despite a global billings decrease of around 4%.
The CEO, Dusan Senkypl, is optimistic about the future, focusing on long-term transformation, including rebuilding of performance marketing channels and supply quality improvements. However, a decline in revenue between 10% and 5% is expected in the second quarter.
In governance matters, Groupon shareholders approved executive compensation and an amendment to the company's 2011 Incentive Plan during their recent annual meeting.
The amendment expands the number of authorized shares available under the plan, which is designed to provide equity-based compensation to eligible employees. Furthermore, Deloitte & Touche LLP was ratified as Groupon's independent registered public accounting firm for the fiscal year 2024.
On the analyst front, Roth/MKM maintained its Buy rating on Groupon, keeping its price target at $28. The firm's optimism is driven by the company's recent enhancements to its website, which now features a more user-friendly layout and improved gifting options.
While Roth/MKM kept its full-year revenue and EBITDA estimates unchanged, they acknowledged the potential for a positive surprise in Groupon's performance due to these recent upgrades.
InvestingPro Insights
In light of Northland's optimistic coverage on Groupon, Inc. (NASDAQ:GRPN), real-time data and InvestingPro Tips offer additional insights. Groupon's market capitalization currently stands at $546.85 million, signaling a moderate size in the market. Despite recent revenue contraction, with a decrease of 8.99% over the last twelve months as of Q1 2024, the company has managed to maintain an impressive gross profit margin of 88.41% during the same period. This margin strength is a key point highlighted by InvestingPro Tips, pointing to the company's ability to control costs relative to its revenues.
InvestingPro Tips also indicate that while Groupon has not been profitable over the last twelve months, analysts predict profitability this year, which could signify a pivotal moment in the company's turnaround narrative. Another notable metric is the stock's high price volatility, with a 1-week price total return showing a 9.25% decline, yet a strong return over the last year at 105.8%. This volatility is underscored by the InvestingPro Tips, which suggest that the stock generally trades with high price volatility, a factor that traders might consider for their strategies. Additionally, the company's stock is trading at a high Price / Book multiple of 13.28, which could indicate market optimism about future growth prospects.
For readers seeking deeper analysis and more InvestingPro Tips, there are additional insights available on the Groupon InvestingPro page. And for those interested in subscribing, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 12 more InvestingPro Tips to explore, investors can gain a more comprehensive understanding of Groupon's financials and market position.
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