Yelp: Value, Value, Value

| About: Yelp (YELP)


Yelp releases Q4 earnings early due to a reported PR issue.

The numbers were surprising good in comparison to expectations and far better than how the stock was trading.

The beaten down stock provides opportunity while the market ignores the fundamentals.

Due to the weakness in the market and the negativity from the LinkedIn (NYSE:LNKD) quarterly results, Yelp (NYSE:YELP) crashed to multi-year lows. Even the early release of solid quarterly numbers hasn't helped alleviate the carnage in the stock.

The stock now trades around $16 after trading above $100 a few years back. Based on the current enterprise value and the guidance for ongoing growth, one has to wonder if the stock isn't now reaching a similar inflection point on the downside.

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Early Earnings Release

With the stock down roughly 12% in mid-day trading, the Q4 results were released early. Yelp blames a PR issue, but either way one has to wonder if the company wasn't dying to get the numbers out early.

For the quarter, Yelp reported an EPS of $0.11 that easily smashed the expected loss. Most importantly, the consumer review site provided solid Q1 and 2016 guidance. The market wants to focus on user growth, but Yelp continues to drive revenue growth that reached 40% for Q4.

The most important metric now is the amount of unique app devices that grew 38% over the prior-year period. Though Google (NASDAQ:GOOG)(NASDAQ:GOOGL) continues to direct search traffic towards internal consumer reveiw services, the mobile app is the best method for Yelp to overcome the attempted blocks. For Q4, the company is showing that the app users are 10x more engaged as website users.

The good news is that Yelp has a sustainable business that doesn't need traffic from Google.

Value, Value, Value

Not surprising for a stock that is down roughly 85% from the peak about two years ago, the stock offers value. At current prices, Yelp has an enterprise value below $900 million. The company has roughly $370 million in cash and marketable securities. The consumer review site even generated $3.8 million in cash from operations.

The guidance is for revenues reaching $700 million in 2016. The stock now trades near the 1x sales levels despite having a growth forecast of 26% for the year.

In comparison to LinkedIn after the big sell off and the likes of Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR), Yelp is extremely cheap and trading at valuations far below the other stocks.

YELP EV to Revenues (Forward) Chart

YELP EV to Revenues (Forward) data by YCharts

Based on these numbers, Yelp needs to nearly double the enterprise value in order to match the valuation multiples of both LinkedIn and Twitter.


Clearly, any stock such as Yelp can trade lower. At the current valuation and based on solid revenue growth, the stock is extremely cheap. The company will continue to face a struggle with Google, but the valuation for the stock will build as Yelp increasingly utilizes the mobile app to bypass the Internet search giant.

Disclosure: I am/we are long YELP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.