Wells Fargo Notes Groupon is Clearing A 'Good Path to Profitability'

Groupon GRPN shares have had a rocky start since the IPO back in 2011, dropping from an opening price of $20 to below the $3 mark at one point, but perhaps there is light at the end of the tunnel.

In a note released Monday, Wells Fargo's senior analyst Trisha Dill detailed her reasoning behind a bullish view on the future of Groupon.

Dill titled the note "GRPN: Beginning to See a 'Good' Path to Profitability." She points to four key factors that clearing this path.

1. A mix shift to apparel, a category that is arguably one of the most profitable and fastest growing online retail markets.
2. The development of a Groupon Goods private label which will lead to improved product margins.
3. Improved relations with vendors as the business scales in conjunction with the addition of experienced off-price buyers from Ideeli.
4. More economical shipping resulting from the move away from third party logistics, the launch of a mobile shopping cart and expansion to the pilot testing of the company's local pickup program.

In summarizing her view on the company, Dill had this to say: "We believe Groupon is positioned well to take continued share in the massive local commerce market. We are bullish on the company's strategy to transform into a "pull" marketplace, away from its daily deals legacy, and early indications suggest this transition is gaining traction."

Turning to the valuation of the stock, Wells Fargo rates the stock as Outperform with a price target range of $13 to $14. At last check Groupon is trading at $10.45 up 4.5 percent for Tuesday.