Market Overview

Analysts Check In On Yelp's Q2

Analysts Check In On Yelp's Q2

Yelp Inc (NYSE: YELP) reported second-quarter results highlighted by a solid EBITDA beat on higher sales. Here is a summary of what one bull, bear and neutral analyst said after the earnings report.

The Analysts

  • Oppenheimer's Jed Kelly maintains a Perform rating on Yelp with no price target.
  • Credit Suisse's Stephen Ju maintains at Outperform, price target lifted from $45 to $46.
  • UBS' Eric Sheridan maintains at Sell, $30 price target.

Oppenheimer: Unchanged Outlook

Yelp reported a "solid" quarter as revenue rose 5% from last year, paying advertising accounts (PAAs) rose 3% from the prior quarter, Kelly wrote in a note. In fact, monthly revenue/PAA improved from a 7% decline in the first quarter to 4% growth from a higher national account mix and stabilization among small and medium sized businesses.

Kelly said EBITDA of $55 million came in 10% above expectations and the company saw better self-service efficiencies, lower churn and pricing benefits.

Management's third-quarter revenue guidance of 8% to 10% growth fell short of expectations by 2% and management kept its full-year outlook unchanged.

Related Link: Yelp Shares Tank After Q1 Print: 2 Analyst Takes

Credit Suisse: Benefits From Improved Products

Yelp's improved financial performance in the quarter can be attributed to the introduction of incremental products for advertisers, Ju wrote in a note. This translated to improving retention rates and lower customer churn along with better-than-expected monetization of Yelp's advertising customers.

Ju said the Verified Licenses and Business Highlights products helped generate an incremental 25,000 active paying locations in the first half of 2019. Also, improvements to ad performance generated a 42% increase in paid click volume to advertisers in the second quarter.

UBS: More Improvements Needed

Yelp reported some positive metrics, including inline revenue and an EBITDA and EPS beat, Sheridan wrote in a note. Management also offered some positive commentary on new products and higher consumer engagement from experiences like Yelp Reservations and Waitlist.

However, Yelp needs to show further improvements in the business before investors should be buyers of the stock. Some of the items Sheridan needs to see include a mid-teens or better revenue growth and margin expansion so Yelp can bridge the gap with rival digital advertising platforms who show better margins and operate at much larger scale.

"We still strike a cautious tone on risk/reward from after-market levels as we see YELP as needing to prove out its multi-year plan," Sheridan wrote.

Price Action

Shares of Yelp were trading higher by 6.4% Friday afternoon at $37.07.

Photo credit: StickerGiant Custom Stickers & Labels, Flickr

Latest Ratings for YELP

Nov 2019MaintainsUnderweight
Nov 2019MaintainsEqual-Weight
Nov 2019MaintainsHold

View More Analyst Ratings for YELP
View the Latest Analyst Ratings

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