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Yelp: A Big Recovery Play

Apr. 06, 2021 8:00 AM ETYelp Inc. (YELP)4 Comments
Gary Alexander profile picture
Gary Alexander


  • One of the few among tech stocks, Yelp is trading near all-time highs on bullish hopes for the reopening of the U.S.
  • As consumers go back to visiting restaurants and brick-and-mortar retailers, Yelp traffic will rebound and advertiser budgets will also return.
  • Yelp enters 2021 from a position of strength, having cut a good chunk of its workforce during the pandemic with a plan only to hire back in strategic areas.
  • The stock still looks cheap at ~13x forward EBITDA.
  • Looking for a helping hand in the market? Members of Daily Tech Download get exclusive ideas and guidance to navigate any climate. Learn More »

In the time leading up to the tech rout of February and March, I had advised investors that the best move was to retain exposure in tech, but through more cheaply valued stocks that would A) be less susceptible to a downward re-rating of valuation multiples, and B) would stand to benefit more from economic reopening. Yelp (NYSE:YELP), the beloved reviews aggregator that is one of the most-visited sites for restaurant recommendations (despite now having a site that runs the gamut to all types of local businesses beyond just restaurants), was a perfect example of this thesis playing out well.

I last wrote a bullish article on Yelp in November, when the stock was trading in the low $30s. During the first quarter of 2021, rising rates barely made a dent on Yelp's already-modest valuation, and the hopes of vaccine rollout and a recovery in the small-business clients that make up a large chunk of Yelp's advertiser base took Yelp to new heights. In my view, the Yelp rally still has plenty of room to run.

Beyond being an obvious part of the "reopening trade" and the fact that Yelp has seen revenue climb every quarter since the initial hit of the pandemic took place, Yelp has plenty of other strengths going for it in 2021. Chief among them, in my view, is Yelp's wholesale staffing cuts in 2020. Due to the fact that Yelp was one of the earliest and hardest-hit internet companies in 2020, the company took decisive actions quickly to trim its cost base.

Of a ~6,000 total employee headcount, Yelp laid off about 1k workers and furloughed about 1k more last April. In 2021, Yelp is planning to invest in growth again, but only in key areas. In its Q4 shareholder

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This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

RealAlphaMan profile picture
YELP has always been the most valuable social networking website of them all.

If you truly want to find out what is happening at a business, check YELP. The reviewers, especially the Elite reviewers that have been with them for many years will hold nothing back.

Google reviews are worthless because they are paid for and pumped and brief.

YELP has a proprietary algorithm that sorts out paid and pumped reviews and puts them in a folder called, "Not Recommended" that you can read under all the regular reviews. It's not a perfect program--but near perfect.

Many business owners criticize YELP because they receive many negative reviews. But these are businesses that probably should not be in business as YELP is the "truth serum" that exposes all that is wrong that they don't want to admit to.

Many operators have used YELP to build their businesses by providing excellent product and customer service. YELP tells you who they are.

YELP saves you time allowing you to zero in on the right place to go quickly.

I have been Long YELP forever even when it goes below my buy point. I consider YELP investing a "Thank you" to a company that has made my life more efficient and better.
Quite the opposite !

Yelp is not reliable because they manipulate reviews, they hide good reviews from real customers as "not recommended" with a nonsense excuse of their algorithm, and bring bad reviews (including fake ones) to the front. All this is meant to pressure the small business owners to pay the ransom and change the way the reviews are displayed. It's really like the mafia, you can't even quit and delete your business profile, they hold you hostage.

Yelp sends countless fake leads and inquiries, small business owners waste time and energy responding to quote requests and it's mostly from bargain seekers and tire kickers. Yet they can't be ignored because if it's real people they may write you a bad review for not responding...

You can never tell if reviews on Yelp are real since they do not display the reviewer's full name. Reviews on Google Maps are much better, you see the full name and you know it's a real person. Small business owners do not have to pay Google for having a business listing and reviews.


@Grain-of-salt agree with you. YELP is the worst. As a digital marketing manager who has paid for Yelps services in the tens of thousands I wouldn't recommend them to anyone. In normal PPC speak, you pay for a click and hope to get a lead after a certain number of clicks. Yelp does not do this, they count 'leads' as every click to your website providing non industry standard heavily biased results to customers thinking that their advertisg working when it's not. Yelps service is very misleading. One good thing, they have a strong sales team as in they call you non stop to try and sell you Yelp ads. In my opinion it's the opposite of a buy.
@Grain-of-salt if a company is like the mafia, I’m eager to invest
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