by Tom Taulli | December 5, 2013 11:25 am
Groupon (GRPN) is rapidly becoming a different company. As “daily deals” fade away –– primarily because they are perceived as spam — the company has become a deep-discount e-commerce operator. With consumers still strapped, it could mean that GRPN stock could see strength in the holiday season.
Plus, the mojo may last for Groupon stock throughout 2014 as well.
This is the sentiment of a recent analyst report from Stifel, which calls for a price target on GRPN stock at $15. If right, this means there’s upside of about 66%.
So why the optimistim? First of all, the Stifel report notes that the Christmas season has gotten off to a nice start for GRPN. During the four-day weekend, Groupon reported record sales, which jumped 30% on a year-over-year basis. Some of the key factors included a redesigned website as well as better search capabilities with its mobile apps. No doubt, the good news helped boost GRPN stock about 4%.
But the Stifel report also noted that GRPN is becoming a mobile juggernaut. Consider that over half of the company’s transactions in North America come from Apple (AAPL) and Google (GOOG) mobile devices. In other words, GRPN stock could be more than just a one-hit wonder as it benefits from the long-term forces of the mobile market. Let’s face it, apps are rapidly becoming a key part of shopping.
Yet to position itself — and provide some nice fuel for GRPN stock — the company has been revamping its platform. For example, some of the most popular categories for the holiday weekend included toys, electronics and home goods. These are certainly not the typical things we’ve associated with Groupon, which has been known for discounts on spa treatments, balloon rides and so on.
Of course, there are still big-time risks for GRPN stock. After all, the company continues to have problems in foreign markets, especially in Europe. There is also the competitive environment. Companies like Amazon (AMZN) and eBay (EBAY) not only have strong e-commerce platforms but also popular mobile apps.
Plus, even Google is leveraging its assets, like search and Gmail, to get a piece of the e-commerce market. In fact, in the latest Groupon earnings call, the company noted that moves from GOOG have weighed on business.
But despite all this, Groupon has so far pulled off a nice comeback. Keep in mind that GRPN stock is up about 85% for the year so far. Even better: Shares of Groupon stock still look cheap on a relative basis. GRPN has a sale-to-price ratio of only 2.5. This compares to 44 for Twitter (TWTR) and 17 for Facebook (FB).
In other words, GRPN stock looks like an attractive way to benefit from the strong growth in the mobile market.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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