Victor Anthony Models For Nearly 35% Upside In Yelp

Yelp Inc YELP has outperformed estimates for three consecutive quarters and management has raised 2016 guidance thrice this year.

While the company is testing monetization of its Request-A-Quote [RAQ] service, its national account and self-service channels are likely to drive top-line growth and margin expansion, Aegis Capital’s Victor Anthony said in a report.

Anthony initiated coverage of Yelp with a Buy rating and a price target of $47. Yelp achieved acceleration in local advertising revenue growth for three straight quarters, along with margin expansion. The company is seeking new product opportunities to drive further growth and margin expansion.

RAQ Traction

Yelp's goal for 2017 is to streamline the functionality of RAQ, which should bode well for 2018, Anthony stated. He added, “Request-A-Quote has to potential to become a meaningful new high-margin revenue stream for Yelp that is not reflected in our or the consensus estimates for 2018.”

National Account And Self-Service Channels

Yelp’s national accounts have been growing in-line with the core local advertising business. These accounts have higher revenue yields, margins and retention rates per account. The company’s self-serve channel is a high-margin revenue stream that accelerated more than 100 percent year-over-year in Q3 2016, the analyst mentioned.

Proprietary App Performance

Both Yelp app downloads and average revenue per user grew sequentially in October, November and so far in December.

“The combination of increased app downloads, steady engagement, and increasing revenue per-user, points to revenue upside this quarter,” Anthony wrote.

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