Brean Capital Cuts Groupon Price Target, But Remains Optimistic

• Shares of Groupon Inc (NASDAQ: GRPN) gained 5 percent during Tuesday's session but plunged lower by more than 28 percent early Wednesday morning.
• Groupon's stock was halted shortly after 4:00 p.m. ET Tuesday as the company announced a weak outlook.
• Tom Forte of Brean Capital maintained a Buy rating with a price target lowered to $5 from a previous $8.

Shares of Groupon rallied on Tuesday heading into its third-quarter print after market close. However, the stock was halted shortly after the close and remained untradeable until the company completed its post-earnings conference call.

Groupon did earn more than expected in the third quarter, but revenue fell short of expectations.

During the conference call, Groupon guided its full year 2016 sales to a range of $2.75 billion to $3.05 billion – short of the $3.19 billion analysts were looking for.

Shares resumed trading at 6:20 p.m. ET and lost 22 percent. The selling carried forward into Wednesday's pre-market session as the stock was seen lower by more than 26 percent around 8:30 a.m. ET.

See Also: Read What Cowen Said In October About Groupon

In a report published Wednesday, Brean Capital analyst Tom Forte said "much lower-than-expected" 2016 guidance put "severe pressure" on the stock and "overshadowed" a management change and a "decent" third-quarter print.

Forte continued that the market "disregarded" the positives as Rich Williams (named new CEO) is the "right person" to lead Groupon moving forward. The company should also realize returns from marketing spend and a re-focus on its Groupon Goods category will provide a "higher quality" and "higher margin" opportunity.

Forte remains "optimistic" in Groupon's prospects and suggested that investors who are willing to wait for management's plan to "unfold," could see upside in the stock over time.

Shares remain Buy rated with a price target lowered to $5 from a previous $8.