Groupon surges as 1st-quarter revenue strengthens

AP News
Posted: May 15, 2012 1:03 PM
Groupon surges as 1st-quarter revenue strengthens

Groupon Inc.'s stock jumped more than 16 percent Tuesday as its first-quarter revenue and its customer base grew.

THE SPARK: The online deals company reported late Monday that its revenue soared 89 percent to $559.3 million. This easily beat the $530.5 million that analysts polled by FactSet expected. Its adjusted earnings were 2 cents per share, which matched Wall Street's forecast.

Groupon, which is based in Chicago, went public in November. It ended the quarter with 36.9 million active customers, up from 15.4 million a year earlier.

THE ANALYSIS: Arvind Bhatia of Sterne, Agee & Leach upgraded Groupon to "Buy" from "Neutral" and gave a price target of $20, saying its quarterly revenue performance was better than expected. In North America, revenue was up 75 percent from a year ago, which the analyst said suggests Groupon is gaining significant market share. "Given that North America is a more mature market relative to many international markets, we believe Groupon's first-quarter performance was particularly impressive," Bhatia wrote in a note to clients.

Citi Investment Research's Mark Mahaney also lifted Groupon's rating to "Buy" from "Neutral" but trimmed its price target to $22 from $24. The analyst says he's been impressed with the company's revenue and free cash flow to date.

Herman Leung of Susquehanna Financial Group maintained a "Neutral" rating and lowered Groupon's price target to $15 from $25.

"While first-quarter results are a step in the right direction, we want to see more evidence of sustainability in the model," the analyst said.

SHARE ACTION: Shares of Groupon gained $1.96, or 16.7 percent, to $13.70 in morning trading. Groupon's IPO priced at $20 per share. But the stock has declined steadily since February. It closed at $11.74 on Monday, down 41 percent from its IPO price.