Groupon Inc (NASDAQ:GRPN) closed at $11.53 on Wednesday. This meant reaching a 52-week high that few could have imagined a year ago when the firm traded at $3. Yesterday, investors were once again optimistic, driving the price up even further. Reaching this all-time high is related with long term catalysts and confidence in Groupon Inc. (NASDAQ:GRPN)’s business model. But, the rating upgrade the firm received from Morgan Stanley last Thursday must also be factored in. Hence, short term investors are at least partially responsible for the drive in stock prices.
Overall, Groupon is successful. Despite not having the best track record in terms of sales and revenue, investors believe the firm holds a great future. And, recent developments have contributed to reinforcing this belief. The appointment of CEO Erik Lefkofsky had a positive impact on the firm, giving an initial 20% boost to stock value in early August.
A few weeks later, Groupon Inc (NASDAQ:GRPN) revealed plans to buy storage warehouses and improve its distribution network.
This comes as a strategy shift, which focuses on selling goods directly, instead of relying solely on coupons and discounts to make earnings. Finally, the purchase of Blink – a last minute hotel reservation app – earlier this week, drove stock values over the top.
These recent developments, however, are not the only reason for the increase in share value. Groupon Inc (NASDAQ:GRPN) is answering very well to changes in the US retail sector, where coupons and bargain purchases have become very popular as of late. The economic uncertainties of the past years have opened a niche in which Groupon Inc (NASDAQ:GRPN) has positioned itself strongly. As research by BIA/Kelsey reveals, this industry reach $1.8 billion in 2011, after being practically non-existent a few year before.
Selling goods at discount prices, or coupons for restaurant or cinema deals, has been working great in this environment of lower disposable income. By teaming up with local businesses, which otherwise would not get their discounts out to a larger public, Groupon Inc (NASDAQ:GRPN) has limited its exposure whilst making profits. Also, the firm does not rely exclusively in the U.S. market to make profits, and is now present in 47 countries. The excitement that investors show for Groupon Inc (NASDAQ:GRPN) is justified. The firm continues to make the right moves in an industry that is growing rapidly. Hence, expect this stock to stay on its current upwards path in the foreseeable future.
Disclosure: Pablo Erbar holds no position in any stocks mentioned.