Groupon Inc Stock Up After Strong 3Q, Analysts Bullish

Groupon Inc (NASDAQ:GRPN) shares spiked around 25% during trading Friday after the company reported numbers that were better than consensus third-quarter estimates on Thursday. Investors were positive on the stock, and drove it up even after the company posted lower guidance for the fourth-quarter. Additional analysts are also bullish on the stock after the earnings report.

Worst over for Groupon

Analysts at Credit Suisse have assigned Neutral rating to Groupon with a price target of $6.50. The report noted that EBITDA for the financial year 2014 was lowered by 7 million on the back of negative foreign exchange rate movements. The analysts, however, indicated that the local business of the company is stabilizing, which convinces them to increase the longer term gross profit CAGR by 100 basis points and EBITDA forecast by 200 basis points.

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Deutsche Bank analysts noted that the local billings re-accelerated across ‘All regions’ as the company fought some of the challenges that affected its growth story in the past such as Gmail Inbox changes and purchase-to-redeem from mobile. The analysts noted that they have patiently waited for this revival, and held the view that the worst for Groupon is now over. Revival in growth and potential asset sales will also help Groupon’s multiple.

Achieving set targets

Barrington Research analysts rated the stock as Outperform with a price target of $8. The Barrington analysts believe that Groupon has created a new business category and re-emerged on the fast-growth track. Moreover, the firm has earned revenue of $2 billion in just three years. However, the maturity phase of the company arrived a bit early after delivering a single-digit organic growth. To overcome this shortcoming, the company transformed its business plan and reshuffled its leadership team. Groupon reduced its dependence on the email channel, capitalized on mobile and improved international operations. The analysts believe that the company is well positioned to achieve growth and profitability.

Similarly, Wells Fargo analysts have assigned an Outperform rating to the stock with a valuation in the range of $10-11. The analysts believed that the company has achieved some of its internal targets, which is reflected in the third quarter-results. Now, Groupon is aiming to achieve the target of increasing gross billings and gross profit dollars by 20% or more annually over the next five years.