Shares of Groupon Inc. (NASDAQ: GRPN) rallied on Wednesday after Sterne Agee upgraded the daily deal site’s stock to “buy” from “neutral” and set a price target of $9, citing belief in the company’s ability to expand its efforts especially in overseas markets along with mobile computing amid easing competition and attractive valuation.
Earlier this week, Groupon announced that it acquired MashLogic, the company designed Britley, which is a toolbar plugin.
The Chicago IL based Company is scheduled to report quarterly results on February 27. Arvind Bhatia, an analyst at Sterne Agee however clarified that that upgrade was not a reflection on the fourth quarter results.
“This is an out-of-consensus upgrade predicated on a more-constructive longer-term view of the company and is not a call (on the fourth-quarter)”, wrote Bhatia.
In a research note to clients on Wednesday, Bhatia said that that he was ever more convinced about Groupon’s effort to develop its business from mainly emailing deals to prospective customers that is transforming itself to a marketplace where people seek deals through search engines.
Groupon has been experimenting with this marketplace in New York and Chicago, and might introduce in several cities over the course of the time. Bhatia highlighted that marketplace could prove to be an “important growth driver” for the company.
Although Bhatia wasn’t very sanguine on immediate turnaround in Groupon’s stagnating business in Europe, he was fairly confident about company’s growing traction in international business. In Europe, weakness in the macroeconomic environment has put pressure on Groupon.
Moreover Bhatia believes that easing competition will also benefit Groupon even as it continues to remain largest player in the discount purveyor sector.
Nonetheless, there were some words of caution as the note added, “Meaningful risks remain, the stock will be volatile and we may be a bit early. However, we believe the risks are well-known and largely priced in.”
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