Tigress Financial Sees Strong Growth, Fierce Competition For Yelp

In a recent report, analysts at Tigress Financial Partners gave their take on Yelp Inc YELP in light of the company’s recent acquisition of EAT24. Analysts reiterated their Neutral rating on Yelp’s stock.
Strong growth, but expensive stock
With 62 percent sales growth in the past 12 months, Yelp has on one of the strongest growth profiles of any of the 2,200 companies that Tigress covers. However, analysts point out that Yelp is also one of the most “richly valued” stocks in their coverage universe. Yelp’s 32x EV/EBITDAR and 85x EV/NOPAT suggests high expectations for the company by the market.
EAT24 versus GrubHub
Analysts believe that Yelp’s acquisition of EAT24 will move the company deeper into the online and mobile food ordering service business and result in more direct competition with GrubHub Inc GRUB. Analysts feel that Yelp’s content is superior to GrubHub’s and that the addition of EAT24 will lead to Yelp gaining market share in the space from GrubHub.
The report mentions one shortcoming of EAT24 is that its restaurant offerings falls well short of GrubHub’s offerings. However, analysts believe that expanding restaurant offerings will be one of Yelp's key initiatives moving forward.
Outlook
Analysts see the EAT24 as an important step for Yelp in the evolution of its business and see online food delivery offering strong growth prospects in the future. However, expectations for Yelp stock in the short-term are limited. “Even after the steep post-earnings sell-off, which saw a sequential decline in unique visitors and mobile visitors, we think valuation remains elevated, and we still have concerns about competition in the space, “ analysts explain.
The report lists GrubHub, The Priceline Group Inc PCLN, TripAdvisor Inc TRIP and Google Inc GOOGGOOGL as Yelp’s primary competitors moving forward.