Groupon Inc (GRPN) ideeli Deal Gets NodOf Approval From Sterne Agee

Groupon Inc (GRPN) ideeli Deal Gets NodOf Approval From Sterne Agee
By GrouponRUS (Own work) [CC BY-SA 4.0], via Wikimedia Commons

Groupon Inc (NASDAQ:GRPN) shares rose as much as 4% in afternoon trading today, a day after the company announced that it acquired online flash fashion retailer ideeli. The acquisition was worth $43 million, and Sterne Agee analysts believe that it’s a positive for Groupon Inc (NASDAQ:GRPN) as it tries to distance itself from the image that it’s just a daily deals website.

Groupon pushes into fashion market

Analysts Arvind Bhatia and Brett Strauser say the acquisition of ideeli should enable Groupon Inc (NASDAQ:GRPN) to increase its presence in the $40 billion “off-price fashion market.” They said it should also help ideeli expand into international markets, since the company is currently only domestic. The analysts believe Groupon will be able to leverage its “back-office and distribution infrastructure in various markets.”

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They note that although ideeli’s last reported revenue was $115 million, management has said in the past that they wanted to see a company which generates $1 billion in revenue. Of course if ideeli is grown into a $1 billion per year business, then this would indeed by good for Groupon.

What ideeli brings to Goupon

ideeli has been around since 2007, and it has approximately 6 million members at this point. In October 2012, the company had 5.5 million members. For the 12 months ending in February 2013, the company did post adjusted losses of $27 million. Sterne Agee analysts note, however, that revenue is recorded “on a gross basis,” so ideeli’s billings and revenues are exactly the same. They also said that over half of the company’s revenue is from women’s fashion apparel. The rest comes from accessories and home décor.

Groupon building an online empire

ideeli is just Groupon Inc (NASDAQ:GRPN)’s latest acquisition. The company also completed its acquisition of Korean online retailer Ticket Monster. That deal was concluded more quickly than expected. Ticket Monster has more than $800 million in annual billings and 4 million monthly active users.

The Sterne Agee team raised their price target for Groupon Inc (NASDAQ:GRPN) to $12 per share earlier this month after the company completed the Ticket Monster acquisition.

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