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UPDATE: Groupon (GRPN) Executive Departure Seen as 'Red Flag' (Updated with New Comments)

February 11, 2014 8:44 AM EST Send to a Friend
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Price: $6.97 +1.16%

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    8 Buy, 19 Hold, 4 Sell

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(Updated - February 11, 2014 10:54 AM EST)

Investors learned Monday that Groupon's (NASDAQ: GRPN) Head of Product management, Jeff Holden, is leaving the company in March. In the view of analyst Ross Sandler of Deutsche Bank, the departure is a potential red flag.

"Our bullish view on Groupon's multi-year turn-around is somewhat up in the air after seeing Head of Product Jeff Holden depart for a non-competitive company. While the news dampens the long-term bull case to some degree, GRPN has a deep bench and continues to attract top talent. For 4Q, Groupon continues to execute on its strategy to shift the model from push (email flash sales) to pull (mobile/e-comm), with new selection and categories launched in the quarter," said Sandler.

"The Holden news caught us off-guard and is "cooling-off" our thinking around the long-term opportunity to some degree, but GRPN remains in much better shape than it was 12-24 months ago. We expect Groupon to get more aggressive in 2014 with its growth agenda, as international markets start to benefit from One Playbook," he added. "The next catalyst we see is mid-2014, once the Goods fulfillment unit economics more in line with the industry, and GRPN can go out and start acquiring new customers more aggressively vs. just shifting its existing base from email to mobile (which was the primary story in 2013). In summary, we expect heightened volatility going into results next week given the exec turnover and recent dilutive acquisitions, but are sticking with our Buy."

Update:

In a second note, Sandler said, "We have learned new information this morning around the departure of Jeff Holden, SVP of Product Management. Groupon is likely embarking on a similar company re-organization to the one Amazon went through in mid 2000s, and Google went through in 2011, whereby the company is large enough with three individual global business lines to warrant a de-centralized product strategy. Holden has been a key tenant to Groupon’s success to date, and now some of those responsibilities are moving from a top down to a divisional level within the organization. Hence, our view on the situation is that this is a normal evolution and not nearly as bad as the first read (given the limited information from the announcement last night). The ex-Amazon ranks within Groupon continue to grow and the company continues to attract talent."

Deutsche Bank has a Buy rating on Groupon, Inc. with a price target of $16.00

For an analyst ratings summary and ratings history on Groupon, Inc. (NASDAQ: GRPN) click here. For more ratings news on Groupon, Inc. click here.

Shares of Groupon, Inc. closed at $11.08 yesterday.




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