Groupon gains as Legg Mason's Miller sees opportunity

Bloomberg News
Updated 3/15/2013 6:31 PM
  • This screenshot courtesy of shows the site.

    This screenshot courtesy of shows the site. Associated Press/Daily Herald file photo

Groupon Inc. gained the most in two weeks after Legg Mason Capital Management Chairman Bill Miller said the largest daily-deal website has a "tremendous" opportunity for growth.

The shares rose 6.1 percent to $5.39 at the close in New York, for the biggest gain since March 4. The stock has climbed 11 percent this year, compared with a 9.8 percent increase for the Russell 1000 Index.

"They have no debt; they have an enormous addressable market," Miller said in an interview today on CNBC. "Expectations are low. The stock is cheap."

After the ouster of Andrew Mason as chief executive officer last month, Groupon is searching for a replacement who can help restore credibility and create a moneymaking business after the Chicago-based company lost $723.8 million in the past three years. Groupon's board may have made the right move in seeking to replace Mason, a first-time entrepreneur, with a more seasoned executive, Miller said.

"Andrew is a very smart guy," he said. "He did a great job building the business. Maybe the business is a little too complex for a guy who is 31 or 32 years old."

Legg Mason is among Groupon's largest institutional investors, and Miller's track record beating the returns of the Standard & Poor's 500 Index give his opinions weight with investors, said Tom Forte, an analyst at Telsey Advisory Group in New York.

"His track record is phenomenal," Forte said in an interview today. He has a $5 target price on the shares.

Groupon's strong balance sheet gives the company the necessary breathing room to evolve its business model, Forte said. The daily-deal provider had $1.21 billion in cash at the end of last year, according to data compiled by Bloomberg.

"The company has time to adjust," Forte said. "That's key."

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