GRPN: Future Margin Expansion Will Support Upside As Risk Perception Eases

Analysts have modestly increased their price target on Groupon to $35.33 from $35.33, citing slightly improved discount rate assumptions and steady expectations for revenue growth, profit margins, and future valuation multiples.

Analyst Commentary

Bullish analysts note that the latest price target adjustment reflects confidence that Groupon can sustain its recent operational improvements, even if headline numbers appear largely unchanged. They view the reaffirmed target as a signal that assumptions around user engagement, merchant retention, and cost discipline remain intact.

At the same time, sentiment is not uniformly positive, with some market participants questioning the durability of Groupon's growth profile and the degree of upside embedded in the current valuation.

Bullish Takeaways

• Bullish analysts see the maintained price target as confirmation that Groupon's steady progress on profitability and cash generation is being recognized in valuation models.
• They highlight that execution on expense control and a mix shift toward higher quality, repeat customers supports the view that margins can expand without aggressive revenue acceleration.
• Improved discount rate assumptions are interpreted as a sign of reduced perceived risk around Groupon's ability to deliver on medium term growth objectives.
• Bullish analysts also point to a more disciplined promotional strategy, which they believe can enhance long term brand equity and support a higher earnings multiple over time.

Bearish Takeaways

• Bearish analysts remain cautious that the modest change in inputs does not address structural questions around the scalability of Groupon's marketplace and merchant economics.
• They argue that the current valuation already discounts a meaningful improvement in user growth and engagement, leaving limited room for error in execution.
• Concerns persist that macro headwinds in discretionary spending could pressure local deal volumes, making it harder for Groupon to consistently meet growth expectations.
• Bearish analysts also flag competitive intensity in local services and experiences, which could force higher marketing spend and constrain upside to margin assumptions.

What's in the News

• Completed a multi-year share repurchase program, retiring 17,280,113 shares (60.82 percent of the authorized amount) for a total of $55.17 million under the buyback announced on May 9, 2018 (company buyback filing).

Valuation Changes

• Fair Value Estimate: Unchanged at approximately $35.33 per share, indicating no revision to the core valuation outcome.
• Discount Rate: Fallen slightly from about 9.90 percent to 9.76 percent, reflecting a modest reduction in perceived risk.
• Revenue Growth: Effectively unchanged at around 16.36 percent, suggesting stable expectations for top line expansion.
• Net Profit Margin: Essentially flat at roughly 16.04 percent, indicating no material change in long term profitability assumptions.
• Future P/E: Edged down slightly from about 16.08x to 16.02x, signaling a marginally lower multiple applied to projected earnings.