Groupon, Inc. (NASDAQ:GRPN) Analysts Just Cut Their EPS Forecasts
The analysts covering Groupon, Inc. (NASDAQ:GRPN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the consensus from Groupon's five analysts is for revenues of US$692m in 2022, which would reflect an uneasy 19% decline in sales compared to the last year of performance. After this downgrade, the company is anticipated to report a loss of US$0.74 in 2022, a sharp decline from a profit over the last year. Before this latest update, the analysts had been forecasting revenues of US$841m and earnings per share (EPS) of US$0.53 in 2022. So we can see that the consensus has become notably more bearish on Groupon's outlook with these numbers, making a substantial drop in this year's revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
View our latest analysis for Groupon
The consensus price target fell 25% to US$21.68, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Groupon analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$12.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing that stands out from these estimates is that revenues are expected to keep falling until the end of 2022, roughly in line with the historical decline of 22% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 14% per year. So while a broad number of companies are forecast to grow, unfortunately Groupon is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Groupon dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Groupon.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Groupon analysts - going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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