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Although challenges remain for Yelp Inc (NYSE: YELP) beyond 2016, Deutsche Bank’s Lloyd Walmsley prefers to remain long on the stock due to expectations of upside in 2016 and enhanced long term optionality, driven by increased confidence in the company’s new financial leadership that could help boost product and monetization innovation in 2017 and beyond.
Walmsley upgraded the rating on Yelp from Hold to Buy, while raising the price target from $26 to $33.
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The Upgrade
The analyst mentioned the upgrade reflects “stabilized salesforce productivity, more confidence in management, and improvements in ad units and systems,” which bolsters the long term outlook.
Walmsley expects Yelp to beat the 2016 consensus expectations and guidance, expecting significant upside to Wunderlich’s bull case if the company continues to build on its improving salesforce efficiency, while being able to sustain the ad fulfillment levels seen in Q1.
The Bull Case
If ARPU growth from Q1 continues at 5 percent year-on-year for the remainder of the year, the company would be able to achieve the high end of its guidance, adding 12 percent fewer net new LAAs than during the same period in 2015.
There could be revenue upside of $93 million to the 2-17 estimate if the 1Q salesforce productivity and ad budget fulfillment were sustained, with $28 million in EBITDA upside for the year.
The 2016 and 2017 revenue and EBITDA estimates have been raised, driven by an increase in the ARPU estimate.
Image credit: Nan Palmero, Flickr
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.