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Shares of Yelp (NYSE: YELP) are trading 2.1 percent higher in Tuesday's trading after SunTrust upgraded shares from Neutral to Buy and lowered the price target from $100 to $85.

Analyst Robert Peck believes the recent correction has the stock trading “in-line with mid and large cap internet peers on growth adjusted multiples and DCF looks supportive.”

The pullback was amplified by the broader index selloff, but there are company specific issues which caused underperformance, according to Peck, including:

  • Negative headlines regarding FTC complaints and Virginia Supreme Court case.
  • Weak international traffic data.

The analyst also expects prior deals with Yellow Pages and Yahoo to add 400 basis points of growth to Yelp's top line.

Peck sees five strong underlying fundamentals which will drive Yelp's future success:

  • ”The company has less than 1% share of the $26B U.S. online local ad spend market that is growing 12% per annum.”
  • ”Robust industry growth driven by ongoing secular shift from offline to online, where Yelp is the leader in local content.”
  • ”Improving monetization over time.”
  • ”Peripheral initiatives with large TAMs including International, Deals, reservations, and order placement.”
  • ”An inherently robust margin structure, as the company does not pay for content or traffic acquisition.”

Latest Ratings for YELP

DateFirmActionFromTo
Oct 2014BarclaysMaintainsOverweight
Oct 2014CitigroupMaintainsBuy
Oct 2014JP MorganMaintainsOverweight

View More Analyst Ratings for YELP
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Posted-In: Robert Peck SunTrustAnalyst Color Analyst Ratings

 

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