Groupon Stock Spikes. Why Its Shares Could Triple From Here.

As McGowan detailed in the research note, Groupon’s sales plunged 36% in 2020, as retail stores shuttered and travel nearly stopped at the start of the pandemic. But even as physical retail stores reopened, conditions at Groupon continued to unwind over the next two years, with sales off 32% in 2021, and 38% in 2022.

Merchants found it unnecessary to use discounts and coupons to attract consumers who were flush with stimulus cash and craving a return to normalcy, McGowan wrote. He added that many restaurants and service providers were unable to fully staff, further mitigating the need for discounts.

Now, he said, consumer savings have been depleted, inflation has reduced purchasing power, and a recession may be looming. “We believe this will result in a strong upswing in Groupon’s revenue,” he wrote.

The analyst asserted that Groupon’s ability to generate cash when its business is growing is “severely under-appreciated.” And he noted it has $245 million remaining on an existing stock repurchase plan, which has been lying dormant since before the pandemic. He thinks Groupon will resume stock buybacks by mid-2024. 

McGowan also sees some potential for the company to unlock the value in non-core assets, including its wholly owned GiftCloud unit, which provides corporate gift services, and its modest stake in the U.K. fintech company SumUp.

Earlier this week, Groupon shares fell sharply after the company disclosed an agreement to sell a sliver of its stake in SumUp for a price that implied a much lower valuation than investors had previously calculated.

Write to Eric J. Savitz at [email protected]