Piper Analyst Suggests Buying The Dip In Groupon

Groupon Inc GRPN came under heavy selling pressure Tuesday morning in reaction to a report the company's November performance was poor.

The Analyst

Piper Jaffray's Sam Kemp maintains an Overweight rating on Groupon's stock with an unchanged $6.25 price target.

The Thesis

Groupon's stock fell as much as 5 percent Tuesday after third party data suggested the company's November performance was weak, Kemp said in a note. The problem is that third-party scraping data has proven itself to be "ineffective" given the company's focus on Groupon+ and complete data can not be collected by third par

As Groupon+ becomes more successful over time, the company will actually see lower engagement of traditional vouchers which is what third party data gathers collect, the analyst said. In other words, it's likely weak trends are "actually suggesting strong adoption of Groupon+ (a good thing)."

Groupon is expected to show a strong performance in the fourth quarter due to higher marketing spend, momentum in customer frequency which started in the fourth quarter, the re-platforming of LivingSocial, early signs of success in Groupon+, and an overall branding campaign.

Price Action

Shares of Groupon were trading lower by more than 4 percent at $5.61.

Related Links:

Groupon Is Starting To Look Like A Better Deal

Goldman Sachs: Groupon's Economics Are Getting Worse

Image: Rusty Clark ~ 100K Photos, Flickr