Are Investors Overreacting on Yelp?

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When Yelp Inc. (NYSE: YELP) reported its fourth-quarter financial results late on Wednesday, the company posted $0.19 in earnings per share (EPS) on $218.2 million in revenue. Consensus estimates had called for $0.05 in EPS on revenue of $215.1 million. In the same period of last year, Yelp said it had EPS of $0.27 and $194.8 million in revenue.

During the quarter, Advertising segment revenue totaled $208.4 million, representing 18% growth year over year. Transactions revenue totaled $5.2 million, compared to $16.6 million last year. The decline was due to the sale of Eat24, which had generated a significant portion of the segment’s revenue.

In terms of the firm’s business metrics, Yelp mentioned a few highlights:

  • Cumulative reviews grew 23% year over year to approximately 148 million.
  • App unique devices grew 20% year over year to approximately 29 million on a monthly average basis.
  • Paying advertising accounts grew 21% year over year to approximately 163,000.

Looking ahead to the first quarter, Yelp expects to see net revenues in the range of $218 million to $221 million and adjusted EBITDA between $29 million and $32 million. The consensus estimates are $0.02 in EPS and $218.91 million in revenue for the quarter.

On the books, Yelp’s cash, cash equivalents and short-term marketable securities totaled $821.2 million at the end of the quarter, up from $479.5 million in the same period of last year.

Jeremy Stoppelman, Yelp’s co-founder and chief executive, commented:

We finished 2017 strong with rising growth in new advertiser acquisition and continued improvements in revenue retention from the prior year. In 2018, we are focused on increasing consumer usage through deepening our product experience in the Restaurants category and attracting advertisers through expanding sales channels and increased ad product flexibility.

Shares of Yelp traded early Thursday at $39.99, down almost 10%. The consensus analyst price target is $46.79, and the 52-week trading range is $26.93 to $48.40.