Why Yelp Is Getting Crushed

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Yelp Inc. (NYSE: YELP) reported first-quarter 2017 results after markets closed Tuesday. The local business guide company posted adjusted diluted earnings per share (EPS) of $0.19 on revenues of $197.3 million. In the fourth quarter of 2015, Yelp reported EPS of $0.08 per share on revenues of $158.6 million. The consensus estimates for the quarter called for a net loss of $0.08 and $198.6 million in revenue.

On a GAAP basis, Yelp posted a net loss of $0.06 per share compared with the year-ago net loss per share of $0.20.

The bad news for the company came in its outlook for the second quarter and the 2017 fiscal year. For the quarter Yelp expects net revenues of $202 to $206 million compared with a consensus analyst estimate of $215.42 million. For the full year, the company estimates net revenues of $850 to $865 million. Analysts were looking for full-year revenues of $889.49 million. The full-year estimates have been lowered since Yelp reported earnings in February.

Yelp did not provide earnings per share guidance noting that preparing a non-GAAP estimate “is not available without unreasonable effort.” Adjusted EBITDA for the second quarter is pegged at $32 to $35 million and full-year EBITDA is estimated at $130 to $145 million.

In the fourth quarter, approximately 26 million unique devices accessed Yelp via the mobile app on a monthly average basis, an increase of 26% compared to the same period in 2016 and up from 24 million in the fourth quarter of 2016. Paying advertising accounts rose by 17% year over year to about 139,000.

CFO Lanny Baker said:

While we are lowering our revenue and adjusted EBITDA outlook for the year, sales productivity has rebounded, transactions revenue has accelerated and we’ve seen promising results from our newly expanded retention efforts, giving us confidence in our ability to grow and scale in 2017 and beyond.

For the second consecutive quarter, the revenue and EBITDA outlooks were revised below expectations. Investors see this as a negative sign from a company that depends on growing its business by adding more new and active users.

Shares closed at $34.70 Tuesday and tumbled nearly 28% to $25.05 after hours in a 52-week range of $23.92 to $43.41. The consensus price target on the stock was $41.98 before this afternoon’s report.