Market Overview

Yelp Shares Tank After Q1 Print: 2 Analyst Takes

Yelp Shares Tank After Q1 Print: 2 Analyst Takes

The online review platform Yelp Inc (NYSE: YELP) reported first-quarter results Thursday that were roughly in-line with estimates, but second-quarter guidance fell short of expectations.

The Analysts

Aegis Capital's Victor Anthony maintained a Sell rating on Yelp with an unchanged $29 price target.

KeyBanc Capital Markets' Andy Hargreaves maintained a Sector Weight rating. 

Aegis: Weakening Fundamentals

Yelp's first-quarter revenue matched expectations and adjusted EBITDA slightly beat estimates, Anthony said in a Friday note. 

Digging beyond the headline numbers, there are some signs that the company's core fundamentals continue to weaken, the analyst said.  

The core local advertising segment showed a deceleration in revenue growth for the third straight quarter, and average revenue per user growth slowed for the fifth straight quarter.

The Request-A-Quote feature posted 50-percent year-over-year revenue growth, but the annualized revenue rate fell for the second straight quarter, Anthony said.

Yelp's guidance for 2019 transactions revenue of $15 million and other services revenue of $29 million suggests the local advertising business is growing revenue at 7-9 percent, which is shy of the company's total growth guidance of 8-10 percent, according to Aegis. 

Yelp continues to show a core business that remains challenged, which justifies a bearish stance on the stock, Anthony said. 

KeyBanc: Aggressive Long-Term Guidance

Yelp's first-quarter report shows ad revenue growth decelerated to 6 percent year-over-year, but management's second-quarter guidance looks conservative, Hargreaves said in a Thursday note.  The company's momentum with multilocation and national advertising accounts — coupled with a growing salesforce — could result in a limited acceleration of growth in the back half of 2019 and implies the potential for upside, the analyst said. 

Yet beyond this year, a sustainable mid-teens growth rate through 2023 and significant margin expansion both remain "unlikely," Hargreaves said. 

The company's longer-term guidance is "highly optimistic" but balanced by new product initiatives and a share buyback program, he said.

Price Action

Yelp shares were down 15.8 percent at $33.47 at the time of publication Friday. 

Related Links:

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

The Street Debates What To Do With Yelp Stock After Q4 Beat

Photo courtesy of Yelp. 

Latest Ratings for YELP

Jan 2021JefferiesDowngradesBuyHold
Jan 2021Morgan StanleyMaintainsUnderweight
Nov 2020RBC CapitalMaintainsOutperform

View More Analyst Ratings for YELP
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