NEW YORK (AP) - Groupon Inc.'s stock got a boost Wednesday after an analyst upgraded the online deals company, saying the steep decline in its share price may be done.
THE SPARK: Stifel Nicolaus analyst Jordan Rohan upgraded Groupon to "Hold" from "Sell" and predicted that the shares were worth about $8 to $12. That's below his previous target of $13.
BACKGROUND: Groupon's much-ballyhooed November 2011 initial public offering priced at $20 per share. But the stock has slid this year - it's now worth about half its IPO price - amid investor concerns about the company's growth prospects and its financial reporting.
Groupon restated its fourth-quarter results in March to increase the amount of money it sets aside for refunds. This raised concerns that it might not have the right people and systems in place to monitor itself.
On June 1, its stock dropped further as insiders sold their shares after a prohibition on selling stock after the IPO was lifted. Employees and other insiders are required to wait a set period, usually several months, before selling their stock following a company's initial public stock offering.
THE ANALYSIS: Rohan said investors had factored Groupon's mistakes, insiders' looming stock sales and the company's "disappointing IPO" into the current stock price.
He said that positive signs of new growth could help support the stock, as Groupon tries to transform itself from being a daily deals provider to a broader, more lucrative e-commerce company.
"If Groupon can move into direct e-commerce, and our research shows that the company is moving in that direction, then the fourth-quarter estimates could be too low," he added.
Analysts polled by FactSet expect Groupon to report earnings of 8 cents per share for the last three months of 2012. Rohan expects earnings of 10 cents per share for the same period.
SHARE ACTION: Shares of Chicago-based Groupon rose 85 cents, to 8.6 percent, to close at $10.63.
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