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On Thursday, Roth/MKM maintained a Buy rating on Groupon, Inc. (NASDAQ:GRPN) shares with a steady price target of $26.00. The firm addressed recent concerns over the company's stock performance, which has seen a decline beyond typical market fluctuations. The weakness in Groupon's shares is thought to be influenced by negative perceptions stemming from soft credit card transaction data, which some fear may indicate poor third-quarter results.
The firm suggests that the focus on short-term credit card data might be misguided and that the observed decline could be attributed to factors that obscure the company's underlying progress. According to Roth/MKM, these factors may be overshadowing significant improvements in Groupon's strategic position as it works through its turnaround plan.
The analyst's statement highlights the belief that Groupon's current challenges with credit card transaction data should not overshadow the company's ongoing efforts to restructure and improve its business model. The firm's reiteration of the Buy rating and the $26.00 price target indicates confidence in Groupon's potential to overcome these short-term obstacles.
Roth/MKM's perspective offers a counter-narrative to the prevailing market sentiment, which has been skeptical of Groupon's near-term performance due to the transaction data. The firm's analysis suggests that investors may be overlooking the positive aspects of Groupon's turnaround strategy.
In summary, Roth/MKM stands by its positive outlook on Groupon, emphasizing that the company's recent share price volatility and concerns raised by credit card transaction data may not fully reflect the improvements being made within the company. The firm maintains its Buy rating and price target, signaling a belief in Groupon's ability to execute its turnaround successfully.
In other recent news, Groupon has revealed a mixed bag of results in its second quarter financial report for 2024. The company highlighted a year-over-year increase in North America Local revenues and an uptick in active customers for the second quarter in a row. Despite facing challenges with a cloud migration project that affected site stability, Groupon managed to record its fifth consecutive quarter of positive adjusted EBITDA, generating $11 million in free cash flow.
These recent developments also include Groupon's plans to expand its Software as a Service (SaaS) organization in North America and exit the local business in Italy. The company's transformation plan, which involves selling non-core assets, is projected to yield approximately $90 million.
Despite a 5% year-over-year decrease in global billings to $374 million, Groupon anticipates its revenues to return to sustained positive growth in the fourth quarter, contingent on the successful launch of their new consumer front-end. The company remains optimistic about its transformation plan to drive profitable top-line growth.
InvestingPro Insights
To complement the analysis provided by Roth/MKM, recent data from InvestingPro offers additional context on Groupon's financial position. Despite the challenges highlighted in the article, Groupon maintains an impressive gross profit margin of 89.12% for the last twelve months as of Q2 2024, showcasing the company's ability to generate substantial profits from its revenue.
However, investors should note that Groupon's stock has experienced significant volatility recently. The company's share price has fallen by 37.01% over the past three months, and it's currently trading at only 49.08% of its 52-week high. This aligns with the article's mention of recent stock weakness and market concerns.
An InvestingPro Tip suggests that Groupon's stock is currently in oversold territory based on its RSI (Relative Strength Index), which could indicate a potential buying opportunity for investors who believe in the company's turnaround story. Another InvestingPro Tip notes that analysts predict the company will be profitable this year, supporting Roth/MKM's optimistic outlook.
For those interested in a deeper analysis, InvestingPro offers 11 additional tips on Groupon, providing a more comprehensive view of the company's financial health and market position.
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