Yelp Stock Up 66% Since 2023. Does It Have More Room To Run Post Q4 Results?

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 fourth-quarter results on Thursday, February 15. We expect the stock to see little to no movement post the fiscal Q4 release with revenues and earnings matching expectations. YELP stock has increased from around $27 to $46 since the beginning of 2023, compared to a 31% rise in the S&P index. The stock rise during this period can be attributed to better-than-expected results in the first nine months of 2023. We continue to 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. Yelp has guided 2023 full-year revenue to be in the range of $1.332 billion to $1.337 billion and adjusted EBITDA in the range of $319 million to $324 million.

YELP stock has shown strong gains of 30% from levels of $35 in early January 2021 to current levels now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. However, the increase in YELP stock has been far from consistent. Returns for the stock were 11% in 2021, -25% in 2022, and 73% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that YELP underperformed the S&P in 2021 and 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could YELP face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

(1) Revenues expected to come in line with consensus estimates

Trefis estimates Yelp’s Q4 2023 revenues to be around $342 Mil, in line with the consensus estimate. In Q3, Yelp generated net revenue of $345 million, up 12% year over year (y-o-y), driven by an increase in average revenue per location. The company’s ad clicks grew 9% y-o-y and its ad monetization saw improvement – meaning it made more per click. Its average cost per click was up 4% y-o-y. Yelp has significant exposure to the restaurant industry, which explains a 12% growth in its third-quarter advertising revenue despite inflationary pressures. We forecast Yelp’s Revenues to be $1.3 billion for the fiscal year 2023, up 12% y-o-y.

2) EPS likely to match the consensus estimates

Yelp’s Q4 2023 earnings per share (EPS) is expected to come in at 38 cents per Trefis analysis, matching the consensus estimate. The company’s EPS grew to 79 cents in Q3 2023 from a mere 13 cents in Q3 2022. Its adjusted EBITDA also increased by 30% y-o-y to a record $96 million.

(3) Stock price estimate aligns with the current market price

Going by our Yelp’s Valuation, we estimate earnings per share to come at 98 cents and a P/E multiple of 45.1x in fiscal 2023, translating into a price of around $44, which aligns with 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.

[1] Returns as of 2/11/2024
[2] Cumulative total returns since the end of 2016