NEW YORK (AP) - Shares of Groupon Inc. got a boost Monday after a Morgan Stanley analyst upgraded the online deals company, saying it has gotten better at personalizing offers for users.
THE SPARK: Analyst Scott Devitt upgraded Groupon to "Overweight" from "Equal Weight" after the recent sell-off in its stock. Shares had dropped about 44 percent over the past three months.
He said customers are buying more deals in the U.S. because the company has improved the customization of pitches to subscribers, lifting revenue, while Groupon has also cut marketing expenses by about 50 percent from a year ago.
He expects Groupon to extend these improved systems to its international markets, which are responsible for about 60 percent of total revenue.
THE BIG PICTURE: Groupon makes money by selling online deals for spas, restaurants and weekend getaways. Though it recently reported a good quarter, its stock has been battered due to a series of missteps with its finances. In March, the company restated its quarterly financial results, explaining that it lost more than it initially reported because it had to pay out more refunds than expected. In May, it replaced two of its board members to add executives with more accounting experience.
THE ANALYSIS: Devitt said that the company had been gaining while competitors lost some ground.
"We believe Groupon and daily deals are here to stay," Devitt wrote in a note to investors. "The competitive landscape, however, has shifted. The daily deal or Groupon clones have become less relevant."
Devitt said that while competitors such as LivingSocial, Amazon.com Inc.'s Amazon Local and Google Inc.'s Offers have continued to grow, they have not made a significant difference to the daily deals industry, which Groupon created.
He has a target price of $18 on Groupon.
SHARE ACTION: Chicago-based Groupon's stock rose 98 cents, or 10 percent, to $11.04 in afternoon trading. But it remains far off its initial public stock offering price of $20 from November. Shares have ranged from $8.80 and $31.14 since then.
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