Yelp Stock Down 14% Over Six Months. What’s Next?

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YELP: Yelp logo
YELP
Yelp

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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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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