Analyst Scott Devitt of Morgan Stanley hit the “refresh” button on some Internet stocks on Thursday, putting pressures (albeit in different directions) on Groupon (GRPN) , Open Table (OPEN) and Zillow (Z) .
Groupon shares have continued their year-long upward march after Devitt upgraded the online deals company to “overweight” (or “buy”) from “equal weight,” saying he sees strength in the company’s mobile business and a rebound in overseas markets. Devitt also thinks that the company is effectively transitioning into not just a deal site, but a search engine for offers.
"We believe that Groupon's turnaround in 2013 in North America indicates that the company has solved the issues that hurt the business in 2012,” said Devitt. "With the North American deals business now on solid footing, Groupon is set to roll out the changes it made in the U.S. to Europe and the rest of the world."
Devitt has a $14 price target on Groupon. Shares have jumped about 5 percent on the upgrade to $10.80, putting the stock ahead about 125 percent so far in 2013.
Most other analysts don’t agree with Devitt in this case, seeing Groupon as a hold or sell at this point.
The MS analyst also chimed-in on OpenTrable and Zillow, shifting them downward to “underweight” from “equal weight.” Devitt did, however, raise his price targets on both firms, now pegging OpenTable at $60 from $50 and Zillow at $70 from $66. Generally, investors pay more attention to the rating. “Underweight” is analyst code for sell.
In the report on OpenTable, Devitt noted, “…the company has relatively high penetration of its addressable market, and we believe the Street embeds OpenTable achieving a level of seated diner penetration that could be challenging to achieve.”
Shares of OPEN have slid more than 3 percent in trading to $74.03. With that, shares are still up about 51 percent this year.
Looking at Zillow, Devitt’s view on the online real estate listing company is similar to OpenTable with regards to maximum market capture already baked into the price. He noted that the addressable market could “reach saturation before adjacent opportunities become material enough to sustain its current growth.”
Shares of Z have slipped 1.2 percent to $99.32 today and have gained a sizzling 261 percent in 2013.
In more analyst changes, Facebook (FB) was in focus. Pivotal Research reiterated its “buy” rating on the social media giant, but raised its price target to $48. On the flip side, Oracle Investment Research downgraded Facebook from “strong buy” to a “hold” rating. Most analysts are bullish on Facebook, although its consensus price target of $39.00 outstrips its price on Thursday of $42.51 (shares are up 1.8 percent).
Analyst ratings can be closely followed and certainly attributable to moves in share price, but novice investors also need to heed that there are many upgrades/downgrades and price target shifts every, single day and they are not the be-all-end-all. On Thursday, analystratings.net lists well over 100 upgrades, about 50 downgrades and about 70 price target changes (That’s an estimate, I didn’t count them exactly, but you get the point). Take in the complete view, not just what one analyst has to say.
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