What happened
Shares of Groupon (GRPN 9.03%) have plunged today, down by 7% as of 12:50 p.m. EST, after Barclays resumed bearish coverage on the e-commerce company. The broader market is also selling off aggressively on the first trading day of 2021, with tech stocks falling particularly hard.
So what
Barclays is realigning its coverage universe and analyst Ross Sandler has assumed coverage on Groupon with an underweight (equivalent to sell) rating alongside a price target of $18. That was the same rating and valuation estimate that Barclays previously had on Groupon shares. The price target represents over 50% downside from Thursday's close.
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Now what
Groupon is in the midst of a major strategic transition. The company is shifting from a first-party business to a third-party marketplace model, which will also alter how it recognizes revenue. Groupon previously expected that the transition of its North American business to the new model would be completed by the end of 2020, and the company will now work to pivot its international operations to the same structure in 2021.
Groupon is also looking to reduce costs in order to improve profitability. At a Barclays tech conference last month, CEO Aaron Cooper said, "We're executing on our multi-phase restructuring plan as you noted, which will take $225 million of fixed costs out of the business by 2022."
The chief executive added that Groupon's two priorities for 2021 are to expand inventory and modernize its marketplace.
