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The Ratings Game

Groupon shares rally following analyst upgrade

6/18/12 4:24 PM ET (MarketWatch)

SAN FRANCISCO (MarketWatch) -- Groupon Inc. shares climbed almost 11% on Monday in the wake of a ratings upgrade from a Morgan Stanley analyst, who said the online daily-deals company has made improvements to its market position of late.

Groupon (GRPN) rose more than 10% to $11.15 after Morgan Stanley analyst Scott Devitt raised his rating on the company's stock to overweight from equal weight, with a price target of $18 a share. In a research note, Devitt said that through this year, Groupon has made several moves to improve its business scale and technological operations.

Devitt also said that Groupon's shares have become more attractive following a recent selloff, which included about 600 million shares coming on the market in early June following the end of the company's post-IPO lockup period for insiders to sell their stock.

Groupon went public on Nov. 4, 2011, at $20 a share. Since then, the stock has fallen to as low at $8.80, which it did on June 4.

Devitt said one of the reasons he raised his view on the company's stock is that Groupon has increased its technical profile through a series of acquisitions, including eight that it has made this year. Devitt said that such purchases are making it so "Groupon is starting to see the benefits from its improvements in deal targeting and technology efficiencies."

Groupon has taken some flack over having to restate some of its results earlier this year, but Devitt said the company's industry is still in the nascent stages, giving it more room to grow. Devitt said that Groupon remains "the only daily deal company that consistently provides high quality deals and value added services to its merchants and customers."

Devitt added that Groupon's efforts should be able to help it grow sales while increasing its margins, and improve its ability to personalize and target deals to customers.