The fortune seems to changing for Groupon Inc (NASDAQ:GRPN).  The company that was on the brink of collapse not so long ago and has been widely criticized for its massive marketing budget and lack of strategy is on the rebound lately.

groupon logo

On Friday, after a report from Deutsche Bank AG (NYSE:DB) (FRA:DBK) (ETR:DBK) gave a buy rating, the shares of the company jumped 12 percent, which is three times its all-time low last November.

The analysts are expecting the company to post a decent growth, but still it has a lot to work on, says a report from WSJ.

Marketing Cost Improving

The internet-coupon company’s initial public offering price of US $20 was almost six times the forward revenues of the then-unprofitable company, was a big decision. But what is commendable is that the company has remained in operations despite adverse environment.

In 2011, when the company filed for the IPO, more than half of its revenue was reserved for marketing budget. In the first quarter, the marketing cost was about 8 percent. Though the cut in the spending has affected the growth, it failed to result in the tailspin that many have expected.

A Big Question For Groupon

Groupon Inc (NASDAQ:GRPN) also has a few barriers to entry in the form of a big user base and a world-wide sales force of over 4,000. But the issue is whether the company can maintain growth along with maintaining long-term margin goals. The top line for the company has been severely damaged by the struggling international segment, which the company is still working to turnaround.

A business model that will be more useful to the customers can certainly help the growth targets. The internet coupon company now keeps the deal active on its site for much longer duration so that a user may get the deals they want for a long time.

What if?

For its “indirect” business including coupons, Groupon Inc (NASDAQ:GRPN) has a set a long term operating-profit-margin of 25- 30 percent, compared to 15 percent, in 2012, according to Evercore Partners Inc. (NYSE:EVR). Groupon is targeting an 8 percent margin for newer “direct” business, selling products versus negative-18 per cent last year.

If the company achieves these ambitious targets by 2016 with sales growing at 12 percent annually, the calculated value comes at US $9.70 a share (discounting the cash flows at 10 percent), which is 27 percent higher over the Friday’s price.

However, if the company misses the targets and revenue grow by 8 percent, then the value come US $8, which is marginally higher than the Friday’s close price.

So, no matter what the case is Groupon Inc (NASDAQ:GRPN)’s discount model lives.