May 9 (Reuters) - Groupon Inc shares were set to open about 11 percent higher on Thursday after the daily deals company reported a strong quarter for its North American business, prompting at least four brokerages to raise their stock price targets.
Some analysts said the January-March quarter was an encouraging sign that Groupon has stronger long-term prospects. Some have questioned its future as other online marketing companies easily copied its deals model.
Groupon, founded in 2008, took off by promoting heavy discounts on local services such as spas and restaurants to millions of online subscribers.
But it has lost about three-quarters of its value since its IPO in November 2011 as competition intensified.
Revenue from the company’s North American business rose 42 percent in the first quarter, while international revenue fell 18 percent.
“The bottom line is that the Groupon story may have several lumpy quarters as it gets back on track, but we believe the deal space is real and Groupon’s leadership position will yield a growing, albeit slow, business in 2014 and 2015,” Piper Jaffray analyst Gene Munster wrote in a research note to clients.
Munster, who called the Groupon story “a comedy of errors” in February, raised his price target on the stock by $2 to $9 on Thursday.
RBC Capital Markets, Janney Capital Markets and Jefferies & Co also raised their stock price targets to $6.
Groupon shares, which closed at $5.59 on Wednesday on the Nasdaq, rose to $6.20 in premarket trading on Thursday.
The stock has gained about 23 percent since the Feb. 28 ouster of co-founder and CEO Andrew Mason, who acknowledged he lacked the experience to run an increasingly global public company.
Groupon, which has lost several other key executives in recent months, is still looking for a permanent chief executive. Interim co-CEOs Eric Lefkofsky and Ted Leonsis continue to grapple with its struggling European business, while expanding in the United States.
“The current management team may be ‘gelling’, but it is missing a permanent CEO,” RBC Capital analyst Mark Mahaney said.
Mahaney, who has a “sector perform” rating on the stock, said that although there were bits of good news, overall fundamental trends were deteriorating.
“Hard to know whether the recent stock rally is more than a ‘dead cat bounce’,” he said in a note. (Reporting by Sayantani Ghosh in Bangalore; Editing by Don Sebastian)