Groupon's Great Week: Sign to Stake Stock

 | Jun 21, 2013 | 5:30 PM EDT
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While the rest of the market (Nasdaq) is down 2% for the week, Groupon (GRPN) is up 2.75%. And it's been particularly strong in the last three trading sessions -- right when everyone else was freaking out about Ben Bernanke's comments.


It stems back from last week when Deutsche Bank upgrade its Groupon price target from $6 to $10.

That was a huge upward revision. But the reasoning behind it has really seemed to trickle into the market this week.

Just a reminder that DB analyst Ross Sandler stated that he thought Groupon could go up to $16 in a "bullish scenario."

Here are his reasons for the upgrade:

  1. Groupon is in the midst of a shift from "push" marketing (think all their email blasts) to a "pull" one where users go to the Groupon app for learning about new deals. Groupon is also doing a lot more work to optimize its deals through SEO and SEM search techniques.
  2. There could be another 30% upside to consensus 2015 EBTIDA estimates.
  3. The company can do much better on personalizing deals to its 200 million members.
  4. Better selection offered.
  5. More business driven through goods.
  6. The "pull" strategy (especially through search optimization) greatly grows the addressable audience beyond those 200 million subscribers.
  7. Multiple expansion reflective of the company's ability to show growing revenue again.

I would add another reason to this list: Europe stabilization. Europe has been a sinkhole for Groupon for at least the last two years.

In a recession, you would think Europeans would be starving for Groupon deals. Perhaps. But the company was dealing with legacy issues around how they first aggressively entered Europe with their German brother management team. They've been cleaning up from this mess ever since.

In part, what doomed former CEO Andrew Mason was his inability to get his arms around Europe and finally right the ship there.

And, by righting the ship, I don't even mean making money. They just need to not lose a ton of money any more.  That would be huge.

Their new COO Kal Raman seems to be on the cusp of this.

During its next earnings call in August, if Groupon can show success on the European front and progress in the other areas mentioned by Sandler, this is a stock that could easily blow past $10 afterwards.

It seems a lot of the strength this week is coming from people wanting to get on board the train now in anticipation of that.

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volatility is quite low here, and we could see some downsides here in the short term. ...
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this chart is showing great bullish signs here, we like this to take out the old high shortly. ...



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