LOS ANGELES (AP) -- Groupon Inc. shares rose nearly 5 percent Monday after an analyst upgraded his rating on the stock, saying a selloff that caused the shares to fall to nearly half their initial public offering price has finally made them attractive.
THE SPARK: Evercore Partners analyst Ken Sena said in a note Monday that at around $11, the shares are now 10 times his 2013 estimate for earnings before interest, taxes, depreciation and amortization. He raised his rating to "Overweight" from "Equal Weight."
The company as a whole is now valued just slightly higher than the $6 billion that Google Inc. reportedly offered to pay for the online discounter in December 2010, he said.
While he also cut his price target on the shares to $15 from $20, Sena dismissed several concerns about the company.
One concern is that insiders will sell a lot of their shares on public markets upon the expiration of a lock-up period June 1. Sena said that will likely increase the number of shares available to the public only to about 20 percent of all outstanding shares, up from 6 percent now.
He also dismissed the possibility of a write-down on Groupon's international businesses, saying those operations are showing strong revenue growth and profit margin improvement.
THE BIG PICTURE: Groupon helps companies market their goods or services by offering online discounts via mass e-mailings. Groupon requires a minimum number of patrons pay for the coupon before giving out the discount, ensuring the businesses get a certain amount of income. The business gets a big promotional boost, and some patrons buy the coupons but don't end up using them by the time they expire.
THE ANALYSIS: The company has said it will post revenue of $510 million to $550 million and $50 million to $70 million in consolidated segment operating income when it releases its first-quarter results May 14. Sena said, "We view fundamentals as secure for the time being."
SHARE ACTION: Shares of Groupon rose 58 cents, or 5.2 percent, at $11.71 on Monday. That's up from its worst close at $11.13 on Friday but down from its November peak closing price of $26.19. Groupon's IPO price in early November was $20.
