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SunTrust Sees Rebound Coming For Yelp: Here's Why

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SunTrust Sees Rebound Coming For Yelp: Here's Why
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Yelp Inc (NYSE: YELP) stock has had a rough 2015, with shares down almost 48 percent. Multiple analysts have turned on the stock, including Trip Chowdhry (who called it "total junk"), as well as the Vetr crowd.

In a new note issued Wednesday, analysts at SunTrust said they were transferring coverage of Yelp from Robert Peck to Matthew Thornton. Thornton maintained a Buy rating on Yelp and increased his price target from $32 to $33 per share. "We see upside to 2016 revenue expectations," he wrote, adding that an "upward revision" to Yelp's consensus revenue estimates could be a catalyst because sentiment is so negative at the moment.

Yelp sports a short interest of 14 percent, 6 percentage points above the peer group average. Just 32 percent of Wall Street analysts are positive on Yelp, half the competitor average.

Despite a revenue growth outlook -- 28 percent in 2016 -- that trumps peers like Amazon.com, Inc. (NASDAQ: AMZN) (21 percent), Tripadvisor Inc (NASDAQ: TRIP) (15 percent) and GrubHub Inc (NYSE: GRUB) (25 percent), Yelp trades at an enterprise valuation that's about half the industry norm.

Beyond a sentiment rebound, an additional catalyst SunTrust noted are Yelp's Eat24 and SeatMe businesses. "[W]e believe there is still significant room for innovation on the platform," Thornton wrote.

Risks the analyst noted include the following:

  • Greater competition from social media companies
  • The anti-Yelp documentary "Billion Dollar Bully," expected to be released in March or April

The stock last traded near $28.50 before Wednesday's open. It neared $100 per share in March 2014.

Latest Ratings for YELP

DateFirmActionFromTo
Dec 2017PiperJaffrayDowngradesNeutralUnderweight
Dec 2017Evercore ISI GroupInitiates Coverage OnIn-Line
Nov 2017BairdMaintainsNeutral

View More Analyst Ratings for YELP
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