Groupon (GRPN) shares rallied 5.7% in early trading after the daily-deals site was upgraded to ‘Buy’ from ‘Neutral’ at B. Riley, which also increased the stock’s 12-month price target from $6.00 to $9.50.
The firm’s analyst Sameet Sinha believes that Groupon’s various businesses are entering a period of easier y/y comparisons while operational and strategic improvements will drive organic growth as well as margin expansion in FY2014-15.
Sinha further expects the margins on Groupon’s earnings before interest, taxes, depreciation and amortization, excluding certain items, to rise from 5% in the first quarter of 2014, to 15% by the fourth quarter.
Sinha also said [via MW] that several initiatives Groupon put in place, including increased marketing and technology deployment, should help the company meet its year-end earnings and revenue goals.
“Our upgrade rests a lot on management delivering on their promise, which we feel is achievable based on our sensitivity analysis,” Sinha said.
The stock upgrade arrives amid a rough slump for Groupon in 2014. The company’s share have nosedived 29% over the past 52 weeks and 46% year-to-date. GRPN started the year at $11.85. It closed Monday at $6.45.
GRPN surged nearly 6% to $6.82 in pre-market trading, but fell 2% to $6.32 in regular hours trading.