Yelp Inc. (NYSE:YELP) is set to report FQ4 2013 earnings after the market closes on Wednesday, February 5th. Yelp is one of the most well known apps for finding and rating restaurants and businesses. Analyst expectations for Yelp are high this quarter especially after Facebook (NASDAQ:FB) ripped the cover off the ball with its FQ4 2013 earnings report last week. Mobile advertising has been a large source of growth for Facebook, who have set a shining example of how to capitalize on the smartphone boom that has brought a secular tailwind to the social media mobile apps industry. Wall Street is expecting considerable year over year revenue growth from Yelp this quarter to the tune of 63%. Here's how investors expect Yelp to report this quarter.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Yelp to report -2c EPS and $67.21M revenue while the current Estimize.com consensus from 15 Buy Side and Independent contributing analysts is -1c EPS and $67.89M revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Yelp to beat the Street's expectations on both profit and revenue.
Over the previous 6 quarters, the consensus from Estimize.com has been more accurate than Wall Street in predicting Yelp's revenue 5 times but has struggled with forecasting profit. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a smaller differential compared to recent quarters.
The distribution of estimates published by analysts on the Estimize.com platform range from -7c to 1c EPS and $65.00M to $71.00M in revenues. This quarter we're seeing a moderate distribution of estimates compared to other quarters.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A larger distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Throughout the quarter the EPS consensus from Wall Street dropped from -1c to -2 while the Estimize.com forecast started and ended at -1c. Over the same period of time Wall Street has raised its revenue expectation from $64.34M to $67.21M, while the Estimize community elevated its consensus from $67.2M to $67.89M Timeliness is correlated with accuracy and at the end of the quarter we saw rising revenue expectations and falling profit forecasts.
The analyst with the highest estimate confidence rating this quarter is Slawson, who projects 0c EPS and $71.00M in revenue and self identifies as an independent financial research professional. In the Winter 2014 season Slawson is rated as the 491st best analyst and is ranked 551st overall among over 3,750 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case Slawson is making a bullish call expecting Yelp to beat Wall Street's expectations on profit and revenue by a wide margin. Slawson is particularly bullish on Yelp's ability to generate revenue this quarter.
This quarter, analysts on the Estimize.com platform are expecting Yelp to beat the Street's expectations on both profit and revenue. Twitter (NYSE:TWTR) also reports after the close Wednesday so investors will get a better picture of whether social media companies are up across the board or if the extreme growth is an isolated incident captured by Facebook.
Disclosure: No positions