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Analysts See Continued Opportunity And Growth For Yelp

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Yelp (NYSE: YELP) on Wednesday reported first quarter 2014 financial results.

In the press release, Yelp CEO Jeremy Stoppelman commented, "We had a great start to the year and are excited about the large opportunity ahead of us. Yelp is becoming the gold standard in local search. In the first quarter, we announced our integration into Yahoo local search, building on our existing partnerships with Apple Maps and Bing.

"We also entered into an advertising partnership with YP.com which will enable us to introduce Yelp to an even broader pool of business owners. Looking to the rest of the year, we will continue to support and engage our community of Yelpers, expand geographically and create innovative products that close the loop with business owners."

Summary of First Quarter 2014 Results

  • Yelp reported first quarter EPS of $(0.04) beating the estimated $(0.06). Earnings per share were up 50 percent from the same quarter last year.
  • Revenue grew 66 percent from the first quarter in 2013 at $76.4 million versus the $75.06 million estimate.
  • Cumulative reviews were approximately 57 million, reflecting a 46 percent growth year-over-year.
  • Active local business accounts grew 65 percent year-over-year to approximately 74,000.

Q2 and FY14 Guidance

  • Net revenue for the second quarter is expected to be within $85- $86 million.
  • Yelp forecasts adjusted EDITDA to be within $11.5 and $12.5 million.
  • Net revenue for the full year is expected to be within $363- $367 million.
  • The company guides adjusted EDITDA to be within $56 and $60 million.
  • Stock-based compensation is expected to be within $43- $45 million

Analysts Response

  • Wunderlich Securities analyst Blake Harper maintained his Buy rating and $105 price target on Yelp. The analyst noted the company's solid results with users, reviews and local business advertiser growth in line. Harper wrote, "The company continued to execute well, adding 7k new local business customers, in line with our 74k total estimate, while also growing its user base to 132 million monthly uniques and mobile ads growing to 49% of the total. A lack of EBITDA leverage in the first half of the year and stalled international revenue growth in Q1 were drawbacks, but we believe they are more than offset by the advertiser and user counts and revenue growth in Q1, as well as the raised revenue and EBITDA for FY14."
  • Randy Hugen from Feltl and Company sees Yelp as a leading platform to provide consumers with reviews and information about local businesses. Hugen commented that the company's platform could create an ecosystem to let customers interact with the local business. The analyst further reported that Yelp has the potential to have a operating margins above 40 percent long-term.
  • SunTrust analyst Robert Peck noted that Yelp's key metrics are solid with cohort analysis showing a continued steady review and ad revenue growth. Peck views the company as the leading online destination for "free high quality customer ratings and reviews of, and "yellow-book-type" information on, local business establishments. As such, we believe the company is well positioned within the $26B U.S. local ad spend market, which is growing 12% per annum driven by secular migration from offline to online.
  • Shebly Seyrafi from FBN Securities reiterated an Outperform rating on strong local and brand growth. The analyst commented, "Although bears may point to slowing growth in unique visitors (up 30% Y/Y), large investments in S&M, and still-paltry international revenue (3% of revenue, down from 6% the year before), the company is raising its annual guidance by roughly $10M (we think helped by recent deals with Yahoo and YP as well as the slight beat in FQ1), it is growing its mobile base quite well (mobile unique visitors grew 52% Y/Y), and ALBA (active local business account) grew a very strong 65% Y/Y."
  • Deutsche Bank analyst Lloyd Walmsley remarked that Yelp's first quarter earnings report "confirms our fundamental thesis that improving attribution (closing the loop) and mobile can drive better customer acquisition/retention and user engagement. Traffic growth remains on a tear, mobile usage continues to charge ahead, cohort data remains strong, and call-to-action / Yelp Platform products continue to gain traction. If de-risking continues we see Yelp as an asset many companies would love to own. When sentiment turns, Yelp is among our top picks." Deutsche Bank lowered the price target from $86.00 to $74.00 to reflect the re-rating among high-grwoth revenue names.

Shares of Yelp closed at $63.89 on Thursday, up 9.55 percent for the day.

Posted-In: Analyst Color Earnings News Guidance Price Target Reiteration Management Analyst Ratings

 

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