Did This Top Hedge Fund Get It Right With Groupon?
In 2011, Tiger Global management became a celebrity hedge fund. Its rise to fame was highlighted by 45 percent gains in a market where hedge funds posted average losses of 5.3 percent, and was underscored by big investments in technology and Internet underdogs like Yahoo (NASDAQ:YHOO) and Facebook (NASDAQ:FB).
As a result of the bold and often successful plays of managers Chase Coleman and Feroz Dewan, many investors began closely observing, and even copying, their investments. This helped drive shares of Groupon (NASDAQ:GRPN) up over 8.5 percent on November 20, after the hedge fund disclosed a 9.9 percent stake in the daily-deals company.
The move was particularly interesting at the time because shares had done pretty much nothing but collapse since their IPO. Between the company’s listing on the Nasdaq in November 2011 and the announcement of Tiger Global’s stake in the company, shares had fallen 87 percent, leading some to question Coleman’s judgement.
But those with insight into Coleman’s strategy, or those lucky enough to follow the right pick, have been rewarded for their investment. Shares of Groupon have climbed nearly 57 percent since then, and now an analyst at Sterne Agee has given the stock his seal of approval, driving shares up even further…
“This is an out-of-consensus upgrade predicated on a more constructive longer-term view of the company,” wrote the analyst, according to AllThingsD. The upgrade, from Neutral to Buy, comes two weeks ahead of Groupon’s fourth-quarter earnings, scheduled for February 27, and the analyst wants to make it clear that the upgrade is not a reflection of expectations for the report.
On average, analysts are looking for earnings of $0.03 per share, which compares to a loss of $0.02 per share in the year-ago period. Revenue is expected to increase 26.2 percent to $639.38 million. Those results alone don’t warrant the price target of $9 that the analyst at Sterne Agee thinks the stock could hit within 52 weeks.
The real mover for the stock — and the company — will be its ability to grow into a robust, international e-commerce platform, buoyed by a strong presence in mobile and location-based services. A successful transformation could turn one of the biggest Internet-IPO flops into one of the biggest Internet turnaround stories. And it will do wonders for Tiger Global’s 2013 performance.
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