Stock fell 8.5% on Friday
Groupon (GRPN) fell 8.5% on October 19 to close trading at $3.22. The stock has fallen 14.6% this month and declined 39% since July 25, which has meant negative returns of 37% for Groupon in 2018. Groupon stock is currently trading 1.3% above its 52-week low of $3.18 and 46% below its 52-week high of $5.99.
Groupon struggling with profitability
Groupon decided to exit international markets where it was sustaining losses in 2016 to improve profitability. While this drove sales lower, Groupon’s operating margin rose from 1.8% in 2016 to 5.4% in 2017, while the net margin rose from -6.2% to 0.5% in the same period.
Groupon’s net margin is estimated to decline to -1.9% in 2018. However, analysts expect Groupon’s net margin to be 1.9% in 2019 and 2.8% in 2020. Analysts expect the company’s earnings per share to double in 2018 to $0.22 and rise 13.6% to $0.25 in 2019. The company’s EPS is estimated to rise at a compound annual growth rate (or CAGR) of 36% over the next five years compared to an annual increase of just 0.07% in the last five years.
Average price target of $5.29 for Groupon
Out of the 18 analysts tracking Groupon, five have a “buy” recommendation, eight have a “hold” recommendation, and five recommend a “sell” on the stock. The 12-month average price target for Groupon is $5.29, indicating a 64% upside potential from current prices.