Groupon earns another price target raise at Roth

Roth Capital analyst Sean McGowan has raised his price target on Groupon (Groupon Stock Quote, Chart, News, Analysts, Financials NASDAQ:GRPN) to $33 and is maintaining his “Buy” rating, citing growing confidence that the company’s momentum in attracting merchants and consumers will drive accelerating gains in revenue, earnings and cash flow.

“The stock has responded, more than doubling year-to-date,” McGowan said in a June 2 note. “We are raising our price target to $33, reflecting rising confidence that growth will continue to accelerate, attracting rising interest from investors in growth stocks.”

Groupon shares have climbed sharply over the past year and year-to-date. The stock is up 84% over the last 12 months, 140% so far this year, and 72% since reporting first-quarter results on May 7. In comparison, the Russell 2000 is flat over the past year, down 7% year-to-date and up 4% since May 7, while the S&P 500 has gained 16% over the past year, 7% year-to-date, and 20% since May 7.

“We believe this relative outperformance has been driven by encouraging 1Q’25 results, with double-digit growth in North American Local billings and 5% International Local billing growth (excluding Italy), both of which were better than expected and better than had been reported for several years,” McGowan said. “In addition, investors appear to understand that Groupon is largely immune to the impact of tariffs and that its focus on offering consumers value plays well in an environment of economic uncertainty.”

McGowan said Groupon’s management has shown growing confidence, recently stating that “the time has come… to start playing offence.” He noted that Spain, where many of the company’s current global marketing and operational strategies were first tested, has seen double-digit billing growth, with several cities now performing above 2019 levels. McGowan believes that management is increasingly seeing a path to returning the company to its pre-COVID performance. In 2019, Groupon posted an Adjusted EBITDA of $237.2-million, more than 50% higher than the $152.6-million he currently projects for 2027. However, he believes the potential for positive surprises is high and that over the next year, it will become increasingly clear that Groupon is no longer just a turnaround story but a company with sustainable growth.

McGowan expects Groupon to generate $505.0-million in Adjusted EBITDA on $77.3-million in revenue for fiscal 2025. He forecasts those figures will improve to $560.2-million in EBITDA on $107.5-million in revenue in fiscal 2026.

McGowan said Roth Capital’s confidence in Groupon is growing. While the firm’s estimates for revenue and Adjusted EBITDA are slightly above the high end of management’s guidance, he believes there’s a strong chance that guidance will be raised as the year goes on.

“We expect the North American Local billings growth rate to remain in the low-mid-single-digit range for the balance of the year, but would not be surprised if 4Q exceeded our growth estimate of 11% (in line with 1Q),” he said. “The company paused its Local business in Italy during 2Q of last year, so we expect the reported billings growth to benefit from ‘anniversarying’ that pause, turning positive for the second half for the first time since 2021. And we continue to believe the company seeks to monetize its stake in SumUp.

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