Shares of Groupon Inc. (NASDAQ:GRPN) are surging today after analysts at Piper Jaffray Cos. (NYSE:PJC) upgraded its recommendation for the online marketplace from neutral to overweight, citing that the company has narrowed its focus and has increased marketing spending. They also issued a $6 price target for the stock.
In a note, Piper Jaffray analyst Samuel Kemp wrote, “Groupon is quickly narrowing its product and regional focus to the categories where it can be successful, while deploying marketing dollars to drive growth in North America local deals”.
Shares of Groupon spiked more than 11% Monday, bringing the stock’s year-to-date gains up over 26% for 2016. The company is currently a Zacks Rank #3 (Hold) stock.
Once a favorite tech stock for investors and analysts, the company has struggled since its IPO in 2011 to grow its user base and profits. Groupon replaced its CEO in November 2015, and new CEO Rich Williams has increased marketing budget in an attempt to revive and reinvent the company. The company will spend $150 million to $200 million on marketing this year, which will drive as many as 4.5 million new accounts over the course of the current year, and lead to similar levels next year. Those new accounts will eventually drive $215 million to $280 million in annualized gross profit, and return North America local billings growth to double-digit levels, according to Kemp.
Bottom Line
Groupon has had a successful run thus far in 2016 as seen in the growth of its stock price, and the company is looking to continue its run. With a new CEO at the helm and the possibility of its sales and profits growing at double digit pace, it could very well do so. Though it’s just a Zacks Rank #3 (Hold) now, things are looking up for Groupon, and if more analysts from other firms become more bullish on the company, that ranking, and its stock price, could be on the move.
GROUPON INC (GRPN): Free Stock Analysis Report
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