What To Expect From Yelp’s Stock?

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 4. We expect the stock to see little to no movement post the fiscal Q2 release with earnings and revenues both matching expectations. While Yelp experienced downtime for the large part of 2020, the company has used this time to streamline its strategy by reducing its headcount in its lower revenue-generating Local division and putting more focus on its multi-location sales teams. Yelp has been able to maintain high-teens revenue growth rates and upticks in usage and review creation in 2021 and Q1 2022 – in terms of company metrics.  The main driver for the growth was a jump in ad clicks, as almost all dining and shopping establishments have reopened at normal hours. We expect this trend to continue in Q2 as well. To attract new customers and improve retention, Yelp is investing more in product development, such as improving the Android app.

For fiscal 2022, Yelp sees net revenue to come in toward the higher end of the previously disclosed outlook range of $1.16-$1.18 billion in revenue, representing 12-14% y-o-y revenue growth, and maintains its $260-$280 million in adjusted EBITDA (6 to 14% EBITDA growth) forecast on a 23% adjusted EBITDA margin.

Our forecast indicates that Yelp’s valuation is around $32 a share, which is marginally higher than the current market price. Look at our interactive dashboard analysis on Yelp’s Earnings Preview: What To Expect in Fiscal Q2? for more details.

(1) Revenues expected to be inline with consensus estimates

Trefis estimates Yelp’s Q2 2022 revenues to be around $287 Mil, in line with the consensus estimate. Yelp’s Q1 revenue increased 19% y-o-y to $276.6 million. The company saw 4% y-o-y growth in ad clicks while average cost-per-click increased by 17% y-o-y. The company reported a strong adjusted EBITDA of $48 million, though the EBITDA margin dipped to 17% as the company is investing again for future growth. Going forward, the company expects Q2 net revenue to be in the range of $280 to $290 million. In addition, it also expects adjusted EBITDA to be relatively flat compared to Q1, and in the range of $45 to $55 million. According to company estimates, EBITDA margin will reach 19% (at best) during Q2’22, while YELP’s margins last year were 24%.

2) EPS likely to match with consensus estimates

Yelp’s Q2 2022 earnings per share (EPS) is expected to come in at a gain of a cent per Trefis analysis, matching the consensus estimate. In Q1, the company’s earnings per share came in at a loss of a cent, up from a loss of 8 cents in the year-ago quarter.

(3) Stock price estimate appears appropriately priced at the current market price

Going by our Yelp’s Valuation, we estimate revenue per share (RPS) to come at $15.28 and a P/S multiple of 2.1x in fiscal 2022, translating into a price of around $32, which is almost 2% higher than the current market price.

It is helpful to see how its peers stack up. YELP Peers shows how Yelp compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

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[1] Month-to-date and year-to-date as of 8/2/2022
[2] Cumulative total returns since the end of 2016