Yelp Guidance Just Not Stacking Up to Mega-Valuation

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Published: February 5, 2015 4:36 pm

Last Updated: February 6, 2015 7:11 am

Yelp Inc. (NYSE: YELP) has released its fourth-quarter earnings report. The restaurant, retail and destinations review service reported earnings of $0.24 per share on a gain of 56% in revenues to $109.9 million. This compares to Thomson Reuters estimates of $0.07 EPS and $108.4 million in revenues, and it compares to -$0.03 EPS and $70.65 million in revenues the same quarter from a year ago.

Yelp also said that its local revenue was up 60% in the fourth quarter from a year earlier. Its cumulative reviews rose by 35% to roughly 71 million.

We have seen guidance from Yelp as well. For the first quarter of 2015, net revenue was guided to a range of $114 million to $116 million, versus consensus estimates of $114.99 million. Adjusted EBITDA is expected to be in the range of $19 million to $21 million. For all of 2015, Yelp guided revenues to be up 43% to a range of $538 million to $543 million, versus the consensus estimate of $537.98 million. Adjusted EBITDA is expected to be in the range of $100 million to $103 million for 2015.

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The growth and gains did not help Yelp in the after-hours trading. As a reminder, Yelp was being valued at 144 times expected 2015 earnings per share ahead of this report.

Yelp gave the following metrics:

Average monthly unique visitors rose by 13% to about 135 million.
Average monthly mobile unique visitors rose by 37% to about 72 million.
Active local business accounts rose by 39% to about 93,700.
Local advertising accounts were up 48% to about 84,000.

Yelp CEO Jeremy Stoppelman said:

As we move into 2015, we will look to drive mobile engagement by making Yelp even more useful for everyday consumer needs, increase awareness of Yelp among consumers and deliver and measure ROI for our advertisers. We see a vast market opportunity ahead of us and look forward to capturing more advertising spend as it shifts online. … We achieved full year profitability for the first time while growing revenue in excess of 60% in 2014 and generating operating cash flow of approximately $58 million. Given the leverage we’ve seen in the business and the large opportunity ahead of us, we believe we can achieve adjusted EBITDA margins of 35% to 40% over the long term.

Analysts have recently given favorable calls to Yelp. Raymond James raised its rating to Outperform with a $72 price target on January 27. Since then we have seen Buy and Outperform ratings reiterated by RBC Capital Markets, B. Riley and Wunderlich.

Yelp shares were up by 1.3% to $57.47 in regular trading on Thursday. Its 52-week range is $49.11 to $101.75, and the consensus price target from analysts ahead of earnings was $80.68.

Shares of Yelp were indicated down by over 4% at $54.15 in the after-hours trading session after its earnings report.

ALSO READ: LinkedIn Has Awesome 2015 Guidance

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