Groupon (GRPN) Gets an Upgrade

Chicago, Illinois-based coupon service Groupon (GRPN, $3.85, up $0.36) surged 10.32% after an analyst upgraded the stock to overweight from neutral, and raised its 1-year price target to $6. The company plans to spend $150-$200 million more for marketing in 2016 than in 2015.

The increased marketing will largely be in the U.S. The analyst believes this would attract 3.5-4.5 million new active accounts in 2016, and the company would also attract similar numbers in 2017. This is believed to add annualized gross profit of $215-$280 million. In 2015, the company had a gross profit of $1.385 billion.

On April 28, the $2.18 billion company reported 1st quarter results that beat on earnings and revenue. It reported earnings per share (EPS) of -$0.01 on $731.97 million in revenue, compared to EPS of $0.03 on $750.4 million in revenue a year ago. Analysts had expected EPS of -$0.02 on $718.36 million in revenue.

For the 2nd quarter, which it reports on July 27 after the close, analysts are expecting EPS of -$0.02 on $710.97 million in revenue, compared to EPS of $0.02 on $738.4 million in revenue a year ago. For full year fiscal 2016, the company forecasts revenue of $2.75-$3.05 billion.

Analysts estimate EPS of $0.20 on $2.97 billion in revenue, compared to EPS of $0.14 on $3.12 billion in revenue in 2015. Analysts give the stock a 1-year price target of $4.07. High target is $6. The stock has no trailing PE, a forward PE of 72.64, price/book of 5.83, price/sales of 0.74, and a current ratio of 0.81. Short interest is 12.81%, which means that shares could see a short squeeze on good news.