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Groupon Upgraded At Piper Jaffray, Says Wall Street Isn't Accounting For New Customers

Groupon Upgraded At Piper Jaffray, Says Wall Street Isn't Accounting For New Customers - Groupon, Inc. NASDAQ:GRPN

Piper Jaffray’s Samuel J. Kemp believes Groupon Inc GRPN 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.”

Kemp upgraded the rating on the company to Overweight, with a price target of $6.

Street Not Accounting For New Customers

“While the Street is modeling for Groupon's marketing ramp, it is not accounting for the gross profit generation from newly acquired customers,” the analyst mentioned, while noting the company “excels at the local deal.”

Kemp believes that with the new management team focused on maximizing deal opportunities, Groupon would be able to effectively execute on its initiatives.

In addition, the analyst stated that “with more rigorous financial and operational standards, we believe that Groupon will also mature into a company that can consistently drive higher rates of capital productivity, leading to shareholder value creation.”

Customer Acquisition

According to the Piper Jaffray report, the company is deploying $150 million - $200 million in incremental marketing spend in 2016, as compared to 2015.

This spend is largely for the U.S., which the analyst believes would drive 3.5-4.5 million new active accounts through 2016, as well as similar levels in 2017.

As these customers mature at average run rate levels, they would drive annualized gross profit of $215-$280 million, with North American Local billings growth returning to the double digit levels.

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Jul 2016Piper JaffrayUpgradesNeutralOverweight
Jun 2016Maxim GroupInitiates Coverage onBuy
May 2016RBC CapitalDowngradesSector PerformUnderperform

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