After a 19% decline year-to-date, at the current price of around $29 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 $37 to $29 since the beginning of 2022, compared to a 17% fall 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.
Yelp generated net revenue of $308.9 million in Q3, up 15% year over year (y-o-y). However, the company’s revenue decelerated relatively sharply y-o-y versus 19% growth in Q2. The company is now lapping the reopening surge from late 2021 last year, which saw a sharp rebound in business and consumer confidence (hence saw advertising take off). In Q3, Yelp’s ad clicks were down 15% y-o-y (again due to a strong 28% y-o-y growth in Q3 2021) but its CPC was up a large 36% y-o-y, signifying that its ad monetization is improving as it makes more money per click. In spite of the broad headwinds that all companies are facing, Yelp’s adjusted EBITDA grew 5% y-o-y to $73.9 million, while margins only went down two points to 24%.
We forecast Yelp’s Revenues to be $1.2 billion for the fiscal year 2022, up 15% y-o-y. Looking at the bottom line, we now forecast revenue per share (RPS) estimate to come in at $15.12. Given the changes to our revenues and RPS forecast, we have revised Yelp’s Valuation to $31 per share, based on a $15.12 expected RPS and a 2.0x P/S multiple for the fiscal year 2022. That said, the company’s stock appears modestly cheap at the current price.
Yelp has guided for Q4 revenue to be about $300 million to $310 million. It expects to see a more muted holiday season and less spending from multi-location advertisers in Q4. Additionally, Yelp slightly narrowed its FY 2022 revenue and adjusted EBITDA forecasts. It now sees FY 2022 revenue of $1.185 billion to $1.195 billion vs. the prior forecast of $1.18 billion to $1.20 billion. It also expects FY 2022 adj. EBITDA of $265 million to $275 million vs. a prior forecast of $265 million to $285 million.
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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