Groupon Shares Jump Pre-Market As Deutsche Bank Says Shares Are The Latest Daily Deal

Groupon GRPN shares rose over 5 percent pre-market after Deutsche Bank raised the stock to a buy from a hold and boosted its price target on the stock by nearly two-thirds. The analysts note that Groupon could be entering a new stage of growth and see over 30 percent upside to 2015 EBITDA forecasts.

Ratings Change

Deutsche Bank raised its price target to $10 from $6 previously on the stock and boosted its rating to buy from hold. The new price target represents over 45 percent upside to Thursday's closing price. In the most bullish scenario, they even see the price rising as high as $16 per share, which would see the stock gain over 133 percent from Thursday's close.

"We are upgrading shares of Groupon to Buy based on: 1) the company should be in a position to grow billings 20%+ on the transition to a “pull” strategy, marked by further traction in mobile and SEO/SEM, which should result in 2) up to 30% upside to 2015 consensus EBITDA in our bull case."

"Sentiment has improved since our initial November “warm-up”, and now we are upgrading amidst the current transition phase before growth turns back up. Our base- case scenario assumes no multiple expansion (15x 2014E) and drives our $10 target, with our upside bull-case to $16."

Groupon 2.0

Deutsche Bank noted that they see a new Groupon emerging in the company's fifth year. They identify several new growth drivers that should boost the company through the next six years.

"Looking ahead, we see three primary growth drivers: 1) better activation of current subs (200m+) to customers through personalization, 2) driving new customers at the top of the funnel through mobile app and PC website, and 3) launching more selection, including new channels and further penetrating Goods."

"Groupon is surprisingly the most mobile penetrated e-commerce company we track with over 40% of NA transactions from the channel, growing nearly 100% Y/Y currently. Pull is immensely important as it: 1) demonstrates greater intent to convert, 2) eliminates the fixed shelf space constraint, 3) allows for direct to deal marketing using SEO/SEM, and 4) opens the service to ALL users, not just Groupon subscribers.

New Valuation

"We value Groupon shares based 15x EV/EBITDA on our 2014 estimate. This methodology yields our $10 PT, up from $6 previously. Risks include competition, take-rate compression, growth deceleration." Deutsche Bank's new price target is $10, almost 58 percent above the street. The consensus rating on the street is a hold with a price target of $6.34.

Shares Climb

Groupon shares climbed in the pre-market, rising over 5 percent to $7.35 per share on thin volume. Groupon shares are still about 55 percent below the 52-week high.