Yelp: Is More Upside Coming?

• Yelp Inc YELP has seen a 13.85 percent increase in its share price over the last one month, to $27.07 on November 12.
• Mark S. Mahaney of RBC Capital has upgraded the rating on the company from Sector Perform to Outperform, while raising the price target from $34 to $42.
• Despite the recent surge, the stock has underperformed meaningfully year to date and the valuation is close to trough levels. Mahaney sees “unique core and strategic value in the stock.”

Analyst Mark Mahaney believes that there could be 62 percent upside to the stock, with a “reasonable” potential downside of 20 percent. Therefore, the risk-reward appears “highly attractive.”

“Reaccelerating salesforce growth & reduced churn, a fully rolled out CPC Ad Solution, and a brand advertising campaign are all positive factors,” Mahaney stated.

Yelp continues to be a leader in providing a branded local solution that connects small businesses with “intent-driven” consumers, and the company’s app ranking have been rising consistently.

According to the RBC Capital report, “The Local capabilities and loyal user base the company has created could be attractive to a wide variety of Large Cap ‘Nets.”

In addition, Mahaney believes that Yelp would benefit from the two “large secular tailwinds,” the core play on mobile and growth in native advertising, both of which are expected to benefit from the shutdown of the Branded Display unit and the buildout of the company’s transactions offerings.