Brean Capital Initiates Coverage On Yelp Inc

Brean Capital initiated coverage on Yelp Inc. YELP in a report issued Tuesday with a Hold rating.

Analyst Tom Forte noted that “catalysts for the stock include an acceleration in local advertising revenue growth in 3Q14 and the success of its Yelp Platform. In our view, its $68.78 share price adequately reflects our favorable opinion of Yelp and its business model. We would be comfortable recommending their purchase if there was a pullback.”

Forte believed “the company can drive significant leverage from its model, which is reflected in our long-term adjusted EBITDA margin forecast of 40.0 percent vs. 12.6 percent in 2013. In our view, this is already priced into the stock, which currently trades at a premium to its peers in the technology enabling sector on a forward P/E and EV/EBITDA basis.”

The report concluded that “risks to our Hold rating are the company significantly outperforming against our sales and adjusted EBITDA estimates, being acquired at a premium to where the stock is currently trading, and developing new products and services that would result in a materially higher total addressable market for Yelp.”

Yelp Inc. recently traded at $72.04, up 1.07 percent.