Should You Buy Yelp’s Stock At $39?

[Updated: 08/12/21] Yelp Stock Update

Yelp (NYSE: YELP) recently reported its Q2 results, which were above our estimates. The company reported revenues of $257 million, 5% above the consensus estimate of $245 million and 6% higher than our forecast of $243 million. The company’s earnings per share of $0.05 was well above the $-0.07 per Trefis and $-0.09 consensus estimates. Yelp’s revenues jumped 52% year-over-year (y-o-y) and the company swung to a surprise net profit after heavily trimming operating losses in Q2. In addition, its adjusted EBITDA also expanded a large 473% to $64 million, with a margin up 18 percentage points to 25%. Looking forward, the company raised its outlook for revenues to be in the range of $1.01 to $1.03 billion, compared to the $1.01 billion consensus estimate. Following a strong Q2, and increased guidance, Yelp stock climbed 4% post the Q2 announcement.

We have updated our model following the Q2 release. We now forecast sales to be $1.01 billion for the full year 2021, up 16% y-o-y. Looking at the bottom line, we now estimate EPS to come at a loss of 11 cents, compared to our earlier estimate of a loss of 15 cents. The company has made significant progress on its plan to drive advertising revenue growth from its services categories as well as Self-serve and Multi-location channels, largely due to recovery in local economies and the increased vaccination rates. Given the changes to our revenues and earnings forecast, we have revised our Yelp Valuation at a little over $39 per share, based on $13.85 expected revenue per share (RPS) and a little under 3x P/S multiple for 2021 – almost in line with the current market price.

[Updated: 08/04/21] Yelp Q2 Pre-Earnings

Yelp (NYSE: YELP), an online site for discovering local businesses ranging from bars, restaurants, and cafes, to hairdressers, spas, and gas stations, is scheduled to report its fiscal second-quarter results on Thursday, August 5. We expect the stock to see little to no movement post the fiscal Q2 release with earnings beating expectations but revenues falling short. In Q1, the company saw sales falling under pandemic pressures, but profitability rising on the back of cost cuts. We expect a similar but improved trend in the upcoming Q2, as recovery in local economies and the increased vaccination rate benefited businesses in the more impacted restaurants, retail & other categories during this period. Looking ahead, the company expects to return to year-over-year (y-o-y) revenue growth for the full year 2021. It expects 2021 net revenues to range between $1 billion to $1.02 billion, and EBITDA to fall in the range of $175 to $195 million.

Our forecast indicates that Yelp’s valuation is around $37 a share, which is largely around the current market price. Look at our interactive dashboard analysis on Yelp’s pre-earnings: What To Expect in Fiscal Q2? for more details.

(1) Revenues expected to be marginally below consensus estimates

Trefis estimates Yelp’s Q2 2021 revenues to be around $243.5 Mil, slightly below the consensus estimate of $245.6 Mil. The company saw Q1 revenues fall 7% y-o-y due to advertising declines but were largely consistent with Q4 2020, and $2 million above the high end of company guidance. It is worth mentioning that Yelp’s adjusted EBITDA margins jumped 159% y-o-y to $44 million in Q1 despite a revenue fall. For the full year 2021, we expect Yelp’s revenues to grow 16%  y-o-y to $1.01 billion.

2) EPS likely to come in ahead of consensus estimates

Yelp’s Q2 2021 earnings per share (EPS) is expected to come in at a loss of 7 cents per Trefis analysis, ahead of the loss of 9 cents of the consensus estimate. The company saw its net income narrow down to a loss of $6 million from a year-ago loss of $16 million in Q1, resulting in -$0.08 in earnings per share. We expect the company to continue to post a loss for the full-year fiscal 2021 as well.

(3) Stock price estimate largely around the current market price

We estimate revenue per share (RPS) to come at $13.85 and a P/S multiple of 2.7x in fiscal 2021, translating into a price of around $37, which is almost in line with the current market price.

For further comparison among peer groups, it is helpful to see how they stack up. Yelp Stock Comparison With Peers summarizes how Yelp compares against peers on metrics that matter.

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