Yelp Analysts See Momentum But Debate Revenue Growth View

(Bloomberg) -- Yelp Inc. reported adjusted second-quarter Ebitda that beat expectations and reiterated its view that full-year revenue would rise between 8% and 10%.

Analysts were divided over whether Yelp would meet the outlook, which implies a re-acceleration in growth in the second half. Jefferies wrote that Yelp was “well positioned for solid topline momentum,” while Wedbush remained “cautious” on the online user-review company’s ability to increase revenue so quickly.

Shares of Yelp rose 6.5% in late trading after the market closed on Thursday. The company has seen sharply negative reactions following two of its past three quarterly reports.

Here’s what analysts are saying about the results:

RBC Capital Markets, Shweta Khajuria

Yelp “is gaining some momentum,” based on better-than-expected Ebitda and ad revenue.

Rated outperform, price target $44 from $42.

Jefferies, Brent Thill

Yelp is “well positioned for solid topline momentum heading into 2020.”

“The market continues to overlook key dynamics that could tilt the stock toward outperformance,” including a buyback program and valuation, but revenue growth needs to accelerate in the second half of the year in order for “the market to gain confidence that YELP can execute on its mid-teens 5-year revenue growth target.”

Rated buy with $48 price target. The valuation “continues to reflect investor skepticism” but “presents an attractive risk-reward.”

Wedbush, Ygal Arounian

The quarter was “solid,” but the full-year outlook implies a strong re-acceleration in revenue growth. “We remain cautious on the ability to ramp revenue growth so quickly.” While the company is “better positioned” to grow revenue, thanks to some new ad-product initiatives, many are “still in early stages.”

Rated neutral, price target $38.

Citi, Zachary Morrissey

Yelp saw a 10% increase in ad budget dollars through the end of July, “supporting confidence in achieving its reiterated 2019 guidance.”

Lower-priced products could attract new customers, but may weigh on average revenue per user.

Rated neutral, price target $41.

Cowen, Thomas Champion

“We see some encouraging signs with product improvements,” and Yelp “appears headed in the right direction.”

Market perform, price target $39.

What Bloomberg Intelligence Says:

While Yelp is on track to meet its full-year sales target, “this is unlikely to impress investors as more gains are needed to instill confidence in a turnaround.”

-- Analyst Jitendra Waral

-- Click here for the research

To contact the reporter on this story: Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper

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