Will Yelp's Strong Q1 Be The Beginning Of A Trend?

Shares of Yelp Inc

surged 20 percent after it reported 40 percent growth in local ad revenue, making Deutsche Bank wonder whether the strong first quarter results is the start of a trend. While terming the quarterly results as "best quarter at the company in some time," analyst Lloyd Walmsley wondered "if we may be at the beginning of a run with estimates moving higher." Though the analyst hailed the quarterly results, he pointed out some key factors that investors should focus. Walmsley highlighted that the company noted special promotions around the self-serve channel that suggest the Q/Q growth in local advertising accounts may not be sustainable. In addition, he warned that the unusually fast growth in ARPU may not continue through the year. Pointing to the year-over-year drop in Desktop UVs and international UVs, the analyst noted that CFO transitions always pose risk to guidance. "[W]hile we think Lanny Baker was a strong choice, any transition poses some risk," Walmsley added. The analyst maintained his Hold rating pending more evidence that recent trends are sustainable. But, Walmsley raised his target price on the stock to $26 from $20. Yelp, led by Jeremy Stoppelman, posted a first quarter net loss of $(0.20) per share, $0.04 larger than the Street expected. However, revenue grew 33.8 percent to $158.6 million and beat estimates by $3.03 million as local advertising accounts grew 34 percent to approximately 121 thousand. The company also provided strong outlook for the second quarter and full year. Read more: http://www.benzinga.com/news/earnings/16/05/7940146/yelp-posts-strong-gains-on-growing-ad-revenue#ixzz47tR5i6mN At the time of writing, shares of Yelp climbed 19.05 percent to $25.50.