An upgrade from Piper Jaffray Cos. sent Groupon shares flying on Monday. The firm upgraded the stock from neutral to overweight. The pop was the most the online marketplace has seen in the last three months.
Piper Jaffray has upgraded its recommendation for Groupon, citing the company’s narrowed focus and marketing spending as driving growth.
Piper Jaffray analyst Samuel Kemp wrote in a note, “Groupon is quickly narrowing its product and regional focus to the categories where it can be successful, while deploying marketing dollars to drive growth in North America local deals.”
Groupon is spending $150 million to $200 million on marketing this year compared with last year and according to Kemp, most of that in the U.S., which will drive as many as 4.5 million new accounts over the course of 2016 and see similar levels next year. Those new customers will eventually drive $215 million to $280 million in annualized gross profit and return North America local billings growth to double-digit levels.
“These operational shifts will not only benefit Groupon’s profitability, but we expect it to drive a more focused and methodical company, differentiating itself from the scatterbrain approach of the past,” Kemp said.
Shares climbed as much as 11% on Monday, the most since April 4th. So far this year Groupon shares have seen a 26% rise.
Disclaimer: We have no position in Groupon Inc. (NASDAQ: GRPN) and have not been compensated for this article.