Yelp Continues To Be Weighed Down By Model-Change Related Disruption, Guggenheim Says

Yelp Inc YELP reported fourth-quarter results ahead of its modest projections and announced disappointing guidance. The company’s performance continues to be impacted by model changes and 2019 could be a transition year, according to Guggenheim.

The Analyst

Guggenheim’s Jake Fuller maintains a Neutral rating on Yelp.

The Thesis

Yelp reported fourth-quarter revenue and EBITDA at $244 million and $53 million, respectively, ahead of its guidance of $239-$243 million and $48-$50 million. The guidance was modest reflecting the impact of the issues faced in the prior quarter, including a pick-up churn in paying accounts, decelerating gross adds and operational woes, Fuller said.

The company guided to first-quarter revenue growth of 4-6 percent, significantly below the consensus projection of 10 percent. The EBITDA margin guide of 13-14 percent also came short of the consensus estimate of 17 percent.

A sequential decline in paying accounts impacts the first quarter outlook and the smaller revenue base affects the EBITDA margin guide, Fuller noted.

Although the company has plans to turn things around, with strategies to trigger growth and control costs over the next five years, 2019 could be a “transition” year. The analyst reduced first-quarter revenue estimates for and 2019 from $245 million to $234 million and from $1.048 billion to $1.026 billion, respectively. The EBITDA estimates have also been lowered from $44 million to $31 million and from $222 million to $220 million.

Price Action

Shares of Yelp slipped Thrusday to close at $38.19.

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Photo credit: Derived from "The Yelp RV" By Brian Holsclaw, via Wikimedia Commons