Exclusive: Groupon activist ups stake on 'growing conviction', stock adds new bull

Investing.com -- Shares of Groupon Inc (NASDAQ:GRPN) are trading higher midday Wednesday, up nearly 7%, as both Wall Street’s analysts, as well as some of its biggest shareholders voice strong support for the company.

Northland Initiates at Outperform, $22 Price Target

Today, analysts at Northland Capital Markets initiated coverage of Groupon with an Outperform rating and $22 price target, implying over 50% upside from current levels.

In their note, they cite “mounting evidence” that the company “is in the early innings of a successful turnaround,” namely GRPN’s “first y/y revenue growth in a decade,” as well as early success of its latest initiatives, such as “improved performance marketing spend, simplified checkout process, and higher quality deals.”

Northland highlights solid potential of Groupon’s “future growth levers, such as a new app/website”, aimed “to drive better conversion on the current ~24M visitors a month,” and voices strong support for the company’s cost-cutting efforts that already led to “SG&A falling ~30% y/y over the last four consecutive quarters.”

The analysts credit much of the improved performance to GRPN’s highly experienced CEO Dusan Senkypl, brought onboard in early 2023, who “built his fortune through multiple successful exits at e-commerce companies both as an operator and investor.” They note that Senkypl’s compensation package is fully dependent on Groupon share performance, with “PSU price hurdles 40%, 118%, and 370% above current prices.”

Based on the above, Northland analysts take a bullish stance on the company and see a scenario where “GRPN's multiple will quickly expand.”

Activist Investor Windward Management Raises Stake

Windward Management, an activist fund run by Marc Chalfin, has been one of Groupon’s more vocal bulls over the past year.

In its investor letter published in 2023, the Florida-based manager was among the first to publicly point out the disconnect between the company’s valuation at the time and its prospects under a solid management team. Windwards also took a stake in GRPN.

Today, the fund reiterated its belief in the company again by disclosing an increased 6.5% stake (vs 5.1% previously).

Speaking exclusively to Investing.com, Marc Chalfin said: “Our increased stake underscores our growing conviction in Groupon's turnaround prospects and our belief that the company is on the cusp of accelerating revenue growth, robust EBITDA gains&significant Free Cash Flow generation.  We're pleased to see that prominent analysts are beginning to share our vision for the company."

Growing Positive Sentiment

The latest actions by its top shareholders and the company’s broader spotlight among Wall Street analysts add to the growing positive sentiment around Groupon.

Last month, Roth/MKM analysts praised the company’s updated website “with a cleaner, easier-to-search layout, more prominent promotion of gifting options and an improvement in its inventory of offers (in terms of quality and average selling price).

They now believe the potential for a positive surprise (to EBITDA and Revenue figures) has increased, as they reiterate a Buy rating with $28 Price Target.

Groupon shares are gaining nearly 7% in midday on Wednesday. If Windward and Northland are correct in their estimates -  this is only the beginning.