Yelp Stock Down 14% Over Six Months. What’s Next?
After a 14% decline over the last six months, at the current price of around $31 per share, we believe Yelp’s stock (NASDAQ: YELP), an online site for discovering local businesses ranging from bars, restaurants, and cafes, to hairdressers, spas, and gas stations – could see a modest rebound. YELP stock has declined from around $34 to $29 in the last six months, compared to a 2% rise in the S&P index. The stock decline during this period can be attributed to a slowing economy, driven by supply chain worries. However, we still believe that the company stands to benefit from its shift from local businesses and restaurants to multi-location advertiser strength and an uptrend in cost-per-click (CPC) rates.
In Q4, Yelp generated net revenue of $309.1 million, up 13% year over year (y-o-y) and beat analyst estimates by $2.8 million. However, its earnings per share (EPS) fell 7% y-o-y to 28 cents, and missed the consensus estimate by a cent. For 2022, Yelp’s revenue was up 16% y-o-y to $1.2 billion. Yelp’s ad clicks were down 8% y-o-y but its ad monetization saw improvement – meaning it made more per click. Its average cost per click was up a large 27% y-o-y. Yelp has significant exposure to the restaurant industry, which explains the 15% growth in its 2022 advertising revenue despite inflationary pressures throughout the year. Going forward, the company has guided 2023 full-year revenue to be about $1.29 billion to $1.31 billion. It also expects to see adjusted EBITDA from $290 million to $310 million in 2023.
We forecast Yelp’s Revenues to be $1.3 billion for the fiscal year 2023, up 9% y-o-y. Looking at the bottom line, we now forecast EPS estimates to come in at $1.01. Given the changes to our revenues and EPS forecast, we have revised Yelp’s Valuation to $31 per share, based on a $1.01 expected EPS and a 30.7x P/E multiple for the fiscal year 2023. That said, the company’s stock appears modestly cheap at the current price.
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It is helpful to see how its peers stack up. Check out how Yelp’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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| Mar 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
|
| YELP Return | -2% | 7% | -23% |
| S&P 500 Return | -1% | 2% | 75% |
| Trefis Multi-Strategy Portfolio | -4% | 3% | 224% |
[1] Month-to-date and year-to-date as of 3/20/2023
[2] Cumulative total returns since the end of 2016
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