It's Time to Stop Hating Groupon

 | Feb 14, 2013 | 5:45 PM EST
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Groupon (GRPN) is one of the most vilified stocks out there right now. Consensus is that it's a sham business at best and a fraud at worst.

A stock that is 80% below all-time highs and 70% below its November 2011 IPO price invites a lot of pile-on criticism.

But the bottom appears to be in for the stock, and now there's a chance the stock could be on the cusp of a big breakout. The company will report earnings on Feb. 27.

Even today, the stock has punched through $6 on another upgrade by Evercore to (irony alert) a $5 price target. Yesterday, a Sterne Agee upgrade to $9 sparked a rally.

I am long Groupon, and I believe we could have a spike in the shares after the earnings report.

Similar to Zynga (ZNGA), things have been going badly for so long at Groupon that they're now looking up. Amid such washed-out expectations for the company, it now has a chance to finally beat those expectations.

There were also many hints of positive results in last November's earnings report, even though that report hammered the stock down into the $2s.

  • Europe is a mess, but it is now following the North American playbook (which is working), and if Europe's results are just stable, it will be a big plus for the company overall.
  • North America is really working well, and that looks to continue.
  • According to Groupon on the last call, its business firmed up as the summer transitioned to fall, and there were indications that the fourth quarter had started well. All signs are there for a big fourth quarter.
  • It is now starting to utilize search as a way of pulling in traffic. This is an untapped opportunity.
  • It is better at personalizing emails to get better lift from them.
  • Groupon's Goods business looks to keep growing like a weed. It was at a run rate of $1.5 billion last quarter, and it will probably be a lot more now. Critics say it's a lower-margin business. Who cares, if it delivers a gangbuster quarter in two weeks?
  • It's strongly likely that Groupon will get back to accelerating its revenue this quarter -- possibly with some "profits." Look at how a healthy quarter was a shot in the arm to Zynga. Some of the same mojo could flow back into Groupon.

We're already at $6, and the earnings report is still two weeks out.

With a good report, Groupon could see $8 by early March and start getting people dreaming again about the stock heading back toward its IPO price.

That's still a long ways away, but you still have time to get constructive on Groupon.

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