Is Yelp Still Relevant Post a 13% Fall?
After a 13% decline year-to-date, at the current price of around $32 per share, we believe Yelp 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 rebound. YELP stock has declined from around $37 to $32 since the beginning of 2022, similarly compared to a 13% fall in the S&P index. The stock decline during this period can be attributed to a slowing economy, driven by supply chain worries, the war in Europe, and now another China shut down. However, Yelp has been able to maintain high-teens revenue growth rates and upticks in usage and review creation in 2021 – in terms of company metrics. While Yelp experienced downtime in 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’s adjusted EBITDA has grown massively by 76% year-over-year (y-o-y) to $246 million. In fact, it has issued strong guidance for fiscal 2022 – with $1.16-$1.18 billion in revenue, representing 12-14% y-o-y revenue growth, and $260-$280 million in adjusted EBITDA (6 to 14% EBITDA growth) on a 23% adjusted EBITDA margin.
Yelp’s Q4 revenue increased 17% y-o-y to $273.4 million. The company saw a 9% y-o-y growth in its cumulative reviews, which were also 19% above the same period in 2019. Meanwhile, the number of app-unique devices also grew 6% y-o-y and reached 91% of 2019 levels. In addition, the number of diners seated via Yelp Reservations grew 85% y-o-y in 2021, largely due to an easy pandemic comparison.
We forecast Yelp’s Revenues to be $1.2 billion for the next fiscal year 2022, up 16% y-o-y. Looking at the bottom line, we now forecast revenue per share (RPS) estimate to come in at $15.28. Given the changes to our revenues and RPS forecast, we have revised Yelp’s Valuation to $35 per share, based on a $15.28 expected RPS and a 2.3x P/S multiple for the fiscal year 2022. That said, the company’s stock appears modestly cheap at the current price.
Yelp has always been a leader in restaurants and retail – but in 2021, nearly two-thirds of the company’s revenue came from local services (dry cleaners, electronic repair shops, and the like). Essentially, Yelp has made a seamless transition to becoming an all-in-one resource for local businesses, not just restaurants.
Here you’ll find our previous coverage of YELP stock where you can track our view over time.
While YELP stock looks poised for more gains in the future, 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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