Groupon Inc (NASDAQ:GRPN) has had a rough year this year, but that’s OK, according to Morgan Stanley analysts. They say this year was about “righting the ship and refocusing the business.” They believe the daily deals company has finally found the niche that will save it.

Groupon

Groupon makes progress

Analysts Scott Davitt and Stephen Shin believe Groupon Inc (NASDAQ:GRPN) is making good progress, establishing the groundwork for its new business model and moving toward total execution. They note that the company’s management expects 2014 to be about “fully pivoting” toward the new vision by building the quality of the deals it offers and increasing density in the U.S.

They also believe 2014 will be able focusing on search engine optimization and search engine marketing while rolling out better technology to all of the markets where Groupon offers deals. The analysts have a price target of $15 per share and an Overweight rating on Groupon.

Customer perception of Groupon

The Morgan Stanley team notes that as of right now, customer perception of Groupon Inc (NASDAQ:GRPN) is lagging. CEO Eric Lefkoksky admitted that recently, in fact. However, he thinks that this problem will fix itself as they expand the “breadth, depth and quality” of the merchants offering deals on their site. The company is currently testing “flexing take rates” in an attempt to be able to better accommodate merchants of better quality. After all, the higher the quality of the merchants offering deals on Groupon, the better the company will do.

Where Groupon can go next

Management also said they think gross billings at Groupon can grow by about 20% in each business line in all geographical locations. Chief Financial Officer Jason Child said gross billings will grow first, followed by revenue and then gross profit dollars.

The Morgan Stanley team compared this view to how Amazon.com, Inc. (NASDAQ:AMZN) and Costco see the trade-off. They believe Groupon’s management is willing to sacrifice margin percentages for profit dollars in order to maximize the dollars that will be able to flow through the Groupon network.

Groupon grows ecommerce

This week Groupon Inc (NASDAQ:GRPN) announced steps it was taking to push more into Canada and offer better services there. The company said it chose Borderlinx Global eCommerce Solutions to help it with cross-border sales between the U.S. and Canada. Specifically, the company will help Groupon with its Goods channel, thus enabling consumers in Canada to have access to a greater selection of Goods the company has for sale.

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