Groupon Underwriters Give Stock Huge Premium Valuations
Groupon’s (NASDAQ:GRPN) underwriters are essentially telling investors the company is worth a generous premium over established e-commerce players such as Amazon.com (NASDAQ:AMZN), eBay (NASDAQ:EBAY) and even Google Inc (NASDAQ:GOOG). Five firms are rating Groupon a Buy and the rest as a Hold. And, it’s not a big surprise the lead underwriter in the bunch — Goldman Sachs (NYSE:GS) — came out with a Buy rating and a $29 price target over the next 12 months.
The Street may appear to be slightly cautious about Groupon, but estimates imply a valuation of about 90 times the consensus earnings forecasts for 2012. It’s above Amazon’s (NASDAQ:AMZN) valuation based on the same metrics, and far above the mid-teens multiple carried by Google (NASDAQ:GOOG) and eBay (NASDAQ:EBAY). On average, the price target among the 11 firms that started coverage Wednesday is about $26, with the average profit forecast for 2012 at 29 cents a share, according to MarketWatch’s analysis of the data.
“All the reports discuss how Groupon faces big competition and its risk of suffering from daily deal fatigue. They also highlight its plans to lower its hefty marketing costs, which includes spending to acquire customers. The Goldman note, however, indicates that Groupon will spend $1.6 billion in sales, general, and administrative costs in 2012, which is still hefty, but likely a drop as a percentage of revenue,” according to MarketWatch.
Here’s how Groupon is trading now:
Groupon Inc (NASDAQ:GRPN): GRPN shares recently traded at $22.97, up $0.42, or 1.86%. They have traded in a 52-week range of $14.85 to $31.14. Volume today was 506,480 shares versus a 3-month average volume of 4,810,230 shares. The company’s trailing earnings are $-2.17 per share. Get the most recent company news and stock data here >>