Photo Credit: Tony XQ Chen

Yelp, Inc. (YELP) Information Technology  – Internet, Software & Services | Reports February 8, After Market Closes

Key Takeaways

  • The Estimize consensus is calling for EPS of -$0.04 and revenue of $152.51 million, right in line with Wall Street’s estimates.
  • Yelp faces its biggest threat now that Facebook has begun targeting local revenue
  • Through all the turmoil, Yelp’s mobile app has performed remarkably well generating the highest user engagement
  • What are you expecting for YELP? Get your estimate in here!
  • The business reviewing platform, Yelp, saw its stock freefall the past 2 months after Facebook announced it will begin targeting local revenue. The company, which reports Q4 2015 earnings February 8th, is coming off a third quarter with mixed results. Despite a 40% increase in revenue from Q3 2014, EPS contracted a resounding 320% . This quarter, Yelp’s profitability problem is expected to continue even though revenue will grow. The Estimize consensus is calling for EPS of -$0.04 and revenue of $152.51 million, right in line with Wall Street’s estimates. Compared to Q4 2014 this represents a projected YoY decline in EPS of 156% while revenue is expected to grow 39%. The Estimize community is very bearish on Yelp’s profitability, cutting EPS estimates 65% in the past 3 months. Yelp is plagued with many problems which have weighed heavily on the company’s profitability. One of its biggest concerns is the huge drop in user traffic which bodes poorly for the company’s ad-revenue. 

    In spite of a poor earnings performance, Yelp is still the foremost trusted company of crowdsourced business reviews. Its main problem, which is becoming more apparent, is that it is a fairly basic concept which can be easily replicated. In December 2015, Facebook released an adjacent service to review local businesses. Unlike Yelp, Facebook’s review systems eliminates internet anonymity typically associated with a Yelp rating. Stock prices have reacted negatively to the news and since Dec 2015 shares have fallen 35.8%. Moreover, Yelp faces diminishing web traffic and has separated from key partner, OpenTable. Yelp generates a majority of its traffic from two main engines: its mobile app and Google. While the mobile app has performed remarkably well so far, its presence in Google and other search engines have declined. Still, the company invests heavily into marketing even though it has failed to stimulate comparable top line growth. Despite a strong user base and sales force, Facebook’s entry into the market will have the largest impact on Yelp’s business moving forward. 

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