Groupon: Back from oblivion?

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On Monday, Piper Jaffray analyst Gene Munster wrote a glowing analysis of Groupon ( GRPN ). Munster changed neither his rating (outperform) or his target price ($16), but he did point out several heartening trends, including rising activity on the company's website. This activity is both a result of Groupon's having changed its strategy somewhat, (from newsletter to marketplace) and, according Munster, an indication that the new strategy is working. Munster also predicted that a higher percentage of the deals offered by the company would be utilized this quarter than were last quarter, which probably means the coupons are of higher quality and usability. Again, that makes sense-Groupon has to have a quality product if they expect customers to come to them, rather than vice versa.

I can't be alone in thinking it is odd to see a stock change direction based on an opinion that is an extrapolation based on what one analyst found on the company's website, but this week, shares of GRPN have risen to $6.80, a 10% lift from their Friday close.

I have to admit, I'm intrigued. Just months ago, I put this company on my do not resuscitate (sell) list, but the company does appear to have escaped oblivion for now, and it will likely post a profit this year. What intrigues me most, however, is the suggestion that Groupon is increasing the quality of its product. Yes, that's just my interpretation of what is happening, and yes, it is a necessary part of the new strategy, and yes it may mean nothing but … improving quality of service is just not the act of a dying company.


There are still some negatives to consider before buying GRPN, including poor cash flow and falling return on equity. Even so, I'm taking GRPN off my sell list and putting it on my watch very carefully list. Perhaps I'm just being suckered in by the excitement of a possible comeback story, but I don't think so. For now, that's all I'll say, except to note that Gene Munster's analysis feels more compelling than it reads .

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC .


This article was originally published on MarketIntelligeneCenter.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , stocks , Technology

Referenced Stocks: GRPN

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