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NEW YORK (TheStreet) -- Shares of Groupon (GRPN) - Get Groupon, Inc. Report are gaining, up 3.85% to $7.82 in early market trading Monday, after the online discount retailer had its rating raised to "buy" from "neutral" by analysts at Bank of America/Merrill Lynch this morning.

Analysts at the firm also raised its price target to $9.50 per share from $8 per share, and said the company's "downward estimate revision cycle could be ending." 

Bank of America/Merrill Lynch analysts said they believe the company's strategic asset value and the ability to keep up its growth will help the stock.

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The investment firm sees the progress in the company's turnaround as a positive, and expects Groupon to continue to benefit from its growing customer base.

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Bank of America/Merrill Lynch added that reduction in e-mail headwinds will help the company grow local billings, which are expected to accelerate during the fourth quarter.

Separately, TheStreet Ratings team rates GROUPON INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate GROUPON INC (GRPN) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 722.0% when compared to the same quarter one year ago, falling from -$2.58 million to -$21.21 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, GROUPON INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • GROUPON INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GROUPON INC reported poor results of -$0.14 versus -$0.10 in the prior year. This year, the market expects an improvement in earnings ($0.05 versus -$0.14).
  • This stock's share value has moved by only 18.29% over the past year. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The gross profit margin for GROUPON INC is rather high; currently it is at 55.25%. Regardless of GRPN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.80% trails the industry average.
  • You can view the full analysis from the report here: GRPN Ratings Report

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