Groupon Shares Leap on Morgan Stanley Upgrade

Monday, 18 Jun 2012 04:28 PM

 

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Shares of Groupon Inc surged nearly 11 percent on Monday after Morgan Stanley raised the stock to "overweight," saying the company was getting better at using technology to target users with more personal, relevant deals.

The stock racked up its largest single-day gain since the company announced its first quarterly profit just last month, finishing Monday at $11.15 on Nasdaq.

Groupon's share price remains a far cry from its $20 IPO level. The leader in Internet daily deals has seen its stock wilt under persistent criticism over accounting practices and doubts over the long-term potential of online coupons.

But Morgan Stanley said on Monday that improved precision in user-targeting helped drive a 33 percent first-quarter jump in revenue in North America -- the company's biggest market and a key area of concern among investors.

In the longer term, better personalization will help Groupon avoid "deal fatigue" among its users and shore up margins, Morgan Stanley added.

"Groupon has emerged as the leading local eCommerce company in an industry with significant barriers to scale," Morgan Stanley wrote in a research note. "We believe the recent sell-off of Groupon shares represents a strong buying opportunity."

Morgan Stanley has an $18 target price for the stock.

Groupon, founded by music graduate Andrew Mason, posted its first quarterly profit in May after it managed to rein in marketing spending while expanding its customer and merchant base. Mason told investors at the time that he wanted to invest in the mobile business while using rewards programs and other technology to attract and keep merchants and customers overseas.

New technology, such as "SmartDeals," help make the company's daily deals more relevant. The company is also running more deals closer to customers.

Groupon is rolling this technology out in other countries, and Mason said in May that should help the company's international business from around the third quarter.

© 2014 Thomson/Reuters. All rights reserved.

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