Groupon Morphing Into A Real-Time Marketplace For Local Bargains

Groupon Inc's GRPN strategy of moving away from emailed deals towards a real-time marketplace for local businesses is the "correct" long-term strategic strategy, at least according to Tom White of Macquarie Capital.

White took a deep dive into Groupon's strategy and tracked its active local deal counts in major U.S. cities.

Across 20 cities, White noted that Groupon offers 130,000 deals marketed as "Local," which represents a 26 percent growth since April 2016 and a 94 percent improvement from when this metric was tracked back in August 2015.

White added that all 20 cities experienced a double-digit percentage growth since April 2016, which is a "positive" upward trend.

When the analyst broadened his research to include the 50 largest U.S. cities, he tracked 270,000 deals marketed as "Local." In addition, 44 percent of cities offered at least 5,000 Local deals.

Groupon's management reported it has 475,000 active North American deals as of the second quarter (including 70,000 coupons) and will no longer report this metric moving forward.

White's main takeaway from his latest research is that active deal volume growth alone won't translate to Groupon's success but it's a "key ingredient." In addition, the company is benefiting from re-branding efforts with consumers as Groupon was the only new entrant to comScore's top 25 most downloaded apps for 2016.

Bottom line, Groupon's U.S. turnaround is "on track" and the risk to reward profile is "not as tantalizingly asymmetric as it was earlier this year."

Shares remain Outperform rated with a price target boosted to $6 from a previous $5.20.

The Vetr crowd's bullish sentiment is higher as the crowd-sourced stock rating platform has a $7.81 price target on Groupon's stock which implies an upside of nearly 50 percent.