RBC Capital Downgrades Groupon, Inc. (GRPN) to Underperform

February 21, 2014 6:22 AM EST
Get Alerts GRPN Hot Sheet
Price: $36.81 +1.29%

Rating Summary:
    12 Buy, 18 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 18 | Down: 11 | New: 19
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RBC Capital analyst Mark Mahaney downgraded Groupon, Inc. (NASDAQ: GRPN) from Sector Perform to Underperform with a price target of $7.00 (from $11.00) following mixed Q4 results, with a minimal EBITDA growth outlook for '14 that was significantly below expectations.

The downgrades reflects: "1) Our dramatically reduced estimates and our valuation framework point to valuation downside; 2) North America and International Billings trends are showing greater weakness than expected; 3) Active Customer and Billings Per Customer trends are softening; 4) NA Local Billings (what we view as the company’s key segment) showed only 2% Y/Y growth in Q4; and 5) We view GRPN’s goal of becoming the “starting point for (all) Mobile Commerce” to be excessively ambitious and undermining of the company’s potential to win the Local Commerce/Services market."

Mahaney cited the following positives and negatives:
Positives: 1) Robust Revenue Growth – 20% Y/Y Q4 Revenue growth was the highest we have seen all year, positively impacted by higher than expected EMEA take rate; 2) Continued Mobile Traction; & 3) GRPN Repo’d 3.7MM Shares In Q4. Negatives: 1) Profitability Outlook A Lot Lower Than We Had Thought – Q1 EBITDA guide and implied margin below the Street (at the mid-point) and FY14 Outlook much lower than we anticipated; 2) Billings Growth Rates Decelerated – Total Billings grew 5% Y/Y in Q4, down from 10% in growth in the September quarter; 3) Active Customer Trends Deteriorated – North America Net Customer Adds of 900K were down from 1.2MM in Q4:12; & 4) North America Local Gross Billings Growth Evaporating – growth of 2% Y/Y decelerated sequentially from 15% growth in Q3.

'14E EBITDA decreases 40% to $288MM.

For an analyst ratings summary and ratings history on Groupon, Inc. click here. For more ratings news on Groupon, Inc. click here.

Shares of Groupon, Inc. closed at $10.28 yesterday.

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