Technology

Goldman Sachs Raises the Red Flag on Groupon and OpenTable

Goldman Sachs has made several changes to stocks in its Internet universe coverage on Monday. Two downgrades stood out the most after looking at the calls, and others were boring enough that we decided to ignore them entirely.

It turns out that Goldman Sachs is saying enough of a good thing enough when it comes to Internet valuations. This is a sector move going to Neutral from Attractive after large gains in 2013, despite the continued belief that many of these will continue to grow faster than the broader market.

Groupon Inc. (NASDAQ: GRPN) and OpenTable Inc. (NASDAQ: OPEN) were both downgraded to Neutral from Buy based on the 2013 outperformance and more attractive opportunities elsewhere in the sector.

Groupon was listed as no longer deserving of a premium valuation against peers, and the firm cut the objective price target to $11 from $12 for the next 12 months. Still, the firm’s Heath Terry sees it having an advantage locally over its peers. The valuation premium no longer being deserved is in part due to decelerating revenue growth. Groupon Inc. (NASDAQ: GRPN) was down 4.4% at $8.65 after two hours of trading Monday, and against a 52-week range of $3.70 to $12.76. Groupon’s consensus estimate from Thomson Reuters is $11.81.

OpenTable Inc. (NASDAQ: OPEN) was downgraded to Neutral from Buy based on the positive developments already being priced into the stock. The firm thinks that there are more growth opportunities for it in diners and in cloud offerings for restaurants. Still, the $87 price target just does not justify much positive room for a share price growth ahead. The share price was down 5% at $79.25, against a 52-week range of $41.68 to $87.48. OpenTable’s consensus share price from analysts is down even further at just above $72, according to Thomson Reuters.

More positive valuations were seen for Priceline, Amazon, Twitter and others in the space, but the real highlights here were the downgrades in these key stocks.

 

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