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Why Groupon, Freeport-McMoRan, and ADT Jumped Today

By Dan Caplinger – Feb 16, 2016 at 5:41PM

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The stock market carried some positive momentum into Tuesday, and these stocks helped lift the mood on Wall Street. Find out why.

Image source: Groupon.

Tuesday gave stock market investors something they haven't seen very often in 2016: back-to-back daily gains. News that OPEC nations had agreed to production freezes gave investors the hope that energy markets might stabilize, yet even though oil proceeded to give up early gains, major stock market benchmarks continued to plow higher. By the end of the day, the Dow and the S&P 500 were up between 1% and 2%, and several stocks posted much more considerable gains. Among them were Groupon (GRPN -3.78%), Freeport-McMoRan (FCX -0.03%), and ADT (NYSE: ADT).

Groupon soared 41% after the pioneer in the daily deals segment earned the attention of a leading Chinese e-commerce player. Alibaba took a stake of almost 33 million shares, or 5.6%, in Groupon, and investors speculated that the move signaled an attempt from the Chinese company to play a stronger role in the U.S. market. Combined with Groupon's favorable news on the financial front last week, the daily deals company has investors believing its new concentration on key areas like the North American market could pay off in the long run, especially if it can improve its efficiency and turn revenue into profits. Even with the move, though, Groupon trades at only half the price it fetched a year ago, so the company still needs to make good on its potential in order to justify its recent bounce.

Freeport-McMoRan climbed 15% on a mix of both good and bad news. The mining and energy company didn't get any favors from the drop in crude prices today, and credit rating agency Standard & Poor's downgraded the company's bond rating from an investment grade BBB- to a junk-status BB on Friday. Yet what pulled Freeport up today was an announcement that the company had sold off a 13% stake in its Morenci copper mine in Arizona to Sumitomo Metal Mining. Sumitomo will pay Freeport $1 million for the stake, which should allow Freeport to reduce some of its extensive debt overhang. The deal also has implications for companies seeking to make acquisitions using debt denominated in currencies other than U.S. dollars, but for Freeport, the key is getting its debt under control as quickly as possible.

Finally, ADT skyrocketed 48%. The security company received a buyout bid from private equity funds affiliated with Apollo Global Management for $42 in cash. Apollo intends to merge ADT with its Protection 1 security subsidiary to create a giant in the home-security and automation-systems services business, and Protection 1 executives believe the move should help ADT expand its business more extensively into the lucrative commercial and enterprise space. Meanwhile, many analysts pointed to Apollo's willingness to step up with a major purchase during a time of market turbulence as a positive sign generally, showing that institutional investors have the confidence in the health of the market at least to the extent necessary to buy what many considered to be a bargain-priced services company. In any event, ADT expects the deal to close at mid-year unless a competing bid comes in.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Freeport-McMoRan Inc Stock Quote
Freeport-McMoRan Inc
$39.56 (-0.03%) $0.01
Groupon Stock Quote
$8.41 (-3.78%) $0.33

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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