Groupon Inc (NASDAQ:GRPN)’s rating has been raised by Stifel analysts from Hold to Buy. Analysts believe that, despite the recent rally in shares, there are still good chances for shares to continue to work higher. Analysts Jordan E. Rohan and Michael B. Purcell cite three reasons to back their conclusion: first, increasing growth in core “local” business in the U.S., second, transition towards app-based e-commerce, and lastly, management streamlining operations and improving margins.Groupon

North America strongest for Groupon

Groupon Inc (NASDAQ:GRPN) recently “re-cast” the financials to mark the difference between the profitable, mature regions and less mature, unprofitable geographies. North America and EMEA are the profitable and mature market for Groupon, while other geographies belong to the second category. North America is the most profitable region, accounting for over 75 percent of profitability. According to analysts, lower fulfillment and shipping costs for Groupon Goods may escalate the margins significantly in the coming time.

Analysts estimate gross profits for Groupon Goods to improve from $284 million in 2013, to $506 million in 2015.

Catalysts that have helped the shares

Analysts reveal that, for months, they have been considering taking a more “constructive” approach towards Groupon Inc (NASDAQ:GRPN). During the same period, shares of the company have doubled, overcoming some of the roadblocks in between, and helped by some catalysts. Former CEO Andrew Mason was expelled for creating an operational mess inside the company. Numbers for the company have somewhat improved from being “bad to somewhat stable” in certain geographies. Also, the appointment of Eric Lefkofsky as CEO has helped the company to work more towards efficiency.

Rating reflects a broader view on digital media stocks

The revision in the rating for Groupon is primarily based on the “broader view” of digital media stocks, which are in a good position to gain from increased usage on mobile apps. According to analysts, the competitive environment favors those firms more, who hold a dominating position in their segment. Based on such premise, Groupon Inc (NASDAQ:GRPN) is in good shape, as it is the leader in mobile commerce and local marketing and promotions.

 Investors have revalued their approach towards companies that have increased their focus on mobile devices; like Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX), TripAdvisor, Pandora, and LinkedIn Corp (NYSE:LNKD). This, as per analysts, reflects “true category leaders are few and that the scale and brand power associated with that leadership position is priceless.”

 Also, app-based media and commerce companies will continue to derive benefit from the generalization of handsets and mobile hardware. Since Groupon Inc (NASDAQ:GRPN) holds a leadership position in local commerce with significant market shares, along with strong app usage, it should significantly benefit in the coming years.