Prescience Point Capital Management Releases Groupon, Inc. Analysis, Calls Shares “Significantly Undervalued”, Sets Price Target of $ 63.18

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BATON ROUGE, La., December 21, 2021 / PRNewswire / – Prescience Point Capital Management, a research-driven, catalyst-driven investment firm that seeks superior risk-adjusted returns uncorrelated to the market in general, today announced that it has released a detailed analysis of Groupon, Inc. (Nasdaq: GRPN) (“Groupon” or “the Company”) calling for significantly undervalued stocks with a target price range of $ 63 at $ 98, or 2.7x to 4.3x the current share price.

A copy of Prescience Point’s research report on Groupon can be found HERE.

Prescience Point believes Groupon is a misunderstood company that was wrongly left dead due to an archaic bear thesis and apathetic seller side. Market players have completely ignored the sheer value of Groupon’s investment in To sum up, a fast growing fintech with a CAGR of over 50% of revenue, which we believe is worth at least $ 268 million (and growing) or nearly 40% of Groupon’s current enterprise value. The market is also significantly undervaluing the core business of Groupon, whose recent turnaround has been overshadowed by pandemic-related shutdowns and a recent change in revenue accounting that makes it look like revenue has been cut in half. . We believe the shares are worth 2.7x to 4.3x the current share price.

Prescience Point’s optimistic view of Groupon is based on a number of factors, including:

  • Groupon’s significant stake in SumUp, which we believe has reached at least $ 268 million or nearly 40% of Groupon’s current enterprise value. In 2013, Groupon made a small initial investment in SumUp, a fast-growing fintech with a CAGR of + 50%. Today, GRPN’s investment is worth at least $ 268 million, yet it has been largely overlooked by market players. Even after a recent ~ $ 90 million increase in the book value of the investment, sell-side analysts covering Groupon continued to ignore its existence.
  • Taking into account the SumUp investment, the market values ​​Groupon’s core business at just 4.4 times consensus EBITDA for FY 22. After deducting the value of the SumUp investment, which we estimate to be worth at least $ 268 million, from the current value of the company, we calculate that the market values ​​the main activity of the Company at only 2.9 times the EBITDA of fiscal year 22. This valuation represents a massive reduction of 66% by compared to the company’s historical average multiple of 8.7 times EBITDA for the coming year. At this extremely cheap valuation, very little has to go for Groupon shares to rise significantly from current price points.
  • Despite the severe headwinds created by the global pandemic, Groupon’s activity stabilized. The Bears have continued to postulate that Groupon is a melting ice cube, while completely ignoring recent evidence to the contrary. The pandemic has hit Groupon with a vicious punch of behavior modification and labor shortage that has ravaged demand and supply in key verticals. However, the worst is over with customer attrition as the North America Customer base has bottomed out and international customers are approaching lows, and Groupon’s customer base is now focused on its most loyal and profitable users. Notably, the largest and most profitable sub-category, Local, is already experiencing sequential growth in user numbers and accelerating purchase frequency.
  • The recent and significant drop in revenues is largely attributable to a change in revenue recognition. Historically, the Company’s Goods business represented approximately 50% of total sales. In early 2020, Groupon began to evolve its Merchandise business to a third-party model. As a result, merchandise turnover began to be recognized on a net (previously gross) basis. the North America The transition from the first-party activities of the Goods business was largely completed in Q4-20, while International will be completed by the end of fiscal 21. At first glance, it appears that revenues are fallen off a cliff and will never straighten out. However, this is largely attributable to this change in revenue recognition. As a result, Groupon is likely falling through the cracks of many financial statement screens as potential investors mistakenly conclude that Groupon’s business is down sharply.
  • With minimal leverage and the leanest cost structure in its history, Groupon is well positioned to take advantage of accelerating fundamentals. Groupon has focused on liquidity at the expense of growth throughout the pandemic, stripping down>$ 200 million fixed costs while strengthening its balance sheet. The days of conservatism are over and we expect the Company to deploy significant capital in the coming quarters in pursuit of long-term sustainable growth.
  • Minimal seller-side coverage and high short-term interest show how much Groupon is misunderstood and ignored. Three years ago nine analysts joined the results calls, today there are two. Even with stocks near their all-time lows, short-term interest is still relatively high in the mid-teens as the bears have failed to reassess their archaic short thesis given the price confirmation and negligible bullish sentiment.

Prescience Point predicts that with a return to a more normalized operating environment, Groupon could achieve FY2023 Adjusted EBITDA of $ 286.6 million. Using a conservative multiple of 6.0 times Adjusted EBITDA (above current levels, but well below the Company’s historical average), and taking into account the value of Groupon’s stake in SumUp, Prescience Point has set a target price for Groupon shares of $ 63.18. A more bullish case, assuming an adjusted EBITDA for fiscal 2023 of $ 340.9 million and a multiple of 8.0x (in line with historical levels), results in a target price of $ 98.86.

“We believe that the positive momentum that is developing at Groupon has been misunderstood or ignored by sell-side investors and analysts,” said Eiad Asbahi, Founder and Portfolio Manager of Prescience Point. “Over the past eight years, the value of Groupon’s stake in SumUp has grown exponentially and, alone, today represents nearly 40% of the current value of Groupon’s business. In addition, the core business of the company has recently stabilized and, after taking $ 200 million additional costs for the company and the strengthening of its balance sheet, is well placed to take advantage of the acceleration in fundamentals over the coming quarters. We think stocks are worth $ 63.18 today, and $ 98.86 in a cautious bullish scenario, which would represent a 172.3% to 326.1% premium over the current share price of $ 23.20. “

WARNING

This document does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein in any form to any person. Further, the discussions and opinions contained in this press release are provided for general information only and are not intended to provide investment advice. All statements contained in this press release which are not clearly historical in nature or which necessarily depend on future events are “forward-looking statements”, which are not guarantees of future performance or results, and the words “anticipate “,” Believe “,” expect “,” potential “,” could “,” opportunity “,” estimate “and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained in this press release that are not historical facts are based on current expectations, speak only as of the date of this press release, and involve risks that may cause actual results to materially. different. Certain information contained in this document is based on data obtained from sources believed to be reliable. No representation is made regarding the accuracy or completeness of this data, and any analysis provided to assist the recipient of this presentation in assessing the matters described in this document may be based on subjective assessments and assumptions and may use one of the alternative methodologies that produce different results. Therefore, the analyzes should not be taken as factual either, nor should they be taken as an accurate prediction of future results. All figures are unaudited estimates and subject to revision without notice. Prescience Point disclaims any obligation to update the information contained in this document and reserves the right to modify any of its opinions expressed here at any time, as it deems appropriate.

About Prescience Point Capital Management
Prescience Point Capital Management is a research-driven, catalyst-driven investment firm seeking superior risk-adjusted returns uncorrelated to the broader market. Unlike traditional investment strategies, we are unconstrained and can invest opportunistically on a global scale, across all asset classes, verticals and capital structures. Whether it’s investing in misunderstood distressed assets, creating value through shareholder activism, or uncovering fraud, we seek to capitalize on opportunities others miss or miss. rigid mandates from most investment firms.

Our uniqueness lies in our unconventional thinking, our extensive research, our intellectual curiosity, and our willingness to go against mainstream wisdom.

The company was founded by an investor Eiad Asbahi in 2009 and is headquartered in Baton Rouge, LA.

For more information, please visit www.presciencepoint.com or follow @PresciencePoint.

Prescience Investment Group, LLC is a member of the Financial Industry Regulatory Authority, CRD number 152721.

SOURCE Prescience Point Capital Management

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