Groupon Faces Headwinds: Sell Rating Reaffirmed Amid Technical Challenges and Strategic Overhaul

In a report released today, Eric Sheridan from Goldman Sachs reiterated a Sell rating on Groupon (GRPN – Research Report), with a price target of $12.00.

Eric Sheridan has given his Sell rating due to a combination of factors that indicate potential challenges for Groupon in the near to medium term. Despite a solid start in the first quarter of 2024, Groupon is facing headwinds that include technical issues affecting their conversion funnel, which have led to lower revenue and adjusted EBITDA guidance for the second quarter. Although management maintains its full-year targets, the unresolved technical glitches present significant risks to the execution of the company’s plans. Sheridan recognizes the company’s efforts in its transformation plan, which includes the introduction of new product features and a more localized sales force, but these benefits are expected to materialize over a longer period.
Further, the recommendation to sell GRPN shares takes into account the need for the company to reposition its platform and improve internal efficiency levels. These strategic changes are aimed at better serving the supply and demand dynamics within its marketplace. However, the execution of these initiatives is likely to span multiple quarters, possibly affecting the stock’s performance in the short term. Sheridan’s outlook on Groupon is cautious, considering the broader sector and relative to other investment opportunities, leading to the reaffirmation of a Sell rating and maintaining a 12-month price target of $12. This assessment reflects a careful analysis of the company’s current position and the challenges it must navigate to achieve growth and positive free cash flow in the latter half of the year.

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Groupon (GRPN) Company Description:

Groupon, Inc. operates as a global scaled two-sided marketplace that connects consumers to merchants. The firm provides marketing services by selling vouchers through online local marketplaces. It operates through North America and International segment. The company was founded by Andrew D. Mason, Eric Paul Lefkofsky, and Bradley A. Keywell on January 15, 2008 and is headquartered in Chicago, IL.