Though Drastic, Analysts View Groupon Inc (GRPN) Restructuring As Wise Move

Earlier this week, Groupon Inc (NASDAQ:GRPN) announced its plans to cut 1,100 jobs and exit seven countries. Following these developments, two analysts following the company weighed in.

After learning about these developments, Arvind Bhatia of Sterne Agee rated the stock as Buy though he did not provide a price target. According to Bhatia, one of the possible drivers for the restructuring could be that the company is struggling to perform in markets where it is planning to exit. He said, “[Groupon was] originally in more countries than Amazon was,” while adding “It didn’t make any sense.”

Following Bhatia, Tom Forte of Brean Capital shared similar views as he sees the recent developments as a sign of the company’s maturation. He said, “In its infancy, Groupon seemingly wanted to pursue all market opportunities, including on a geographic basis. As the company has matured, it has made multiple adjustments to its international portfolio.”

Forte believes the company’s recent decisions such as the restructuring of international operations, cutting nearly 1,100 jobs, and winding up operations in seven locations are wise moves. He appreciated the fact that the company is exiting the markets where the return on investment was not good.

Forte concluded, “We expect the company to perform more effectively from an operational standpoint because of the decision. We recommend investors purchase shares at current levels and reiterate our Buy rating.” He set a price target of $8 for the stock.

As per TipRanks’ ratings of nine analysts covering the stock, six of them are recommending Groupon as a Buy, while three are recommending a Hold. Based on price targets set by the analysts in the last three months, the average 12-month price target for the stock is $6.74, which is about an 80% upside from its current levels. On Wednesday, the company’s stock closed at $3.73, down 8.58% from its previous close.

[Image Courtesy of Slate]

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