The Street Debates What To Do With Yelp Stock After Q4 Beat - Yelp (NYSE:YELP)

The crowdsourced review platform Yelp Inc YELP reported Wednesday with fourth-quarter results that easily beat expectations and said it expects revenue to grow at a mid-teens compounded annual growth rate through 2023.

Here's how Yelp analysts on the Street reacted to the print and outlook.

The Analysts

B. Riley FBR's Sameet Sinha maintains a Buy rating on Yelp's stock with a price target lifted from $45 to $50.
Credit Suisse's Stephen Ju maintains at Outperform, price target lifted from $50 to $59.
Morgan Stanley's Brian Nowak maintains at Underweight, price target lifted from $29 to $31.
MKM Partners' Rob Sanderson maintains at Buy, unchanged $40 price target.

B Riley: 4 Takeaways

Yelp's earnings report is highlighted by four key points, Sinha said in a research report.

They are:

Revenue and EBITDA beat expectations, but net paying advertiser additions fell by 3,000 versus expectations for a decline of 1,000.
First-quarter revenue guidance fell short of expectations, but management said it recovered from a slowdown in Q4 that persisted into the new quarter.
The outlook through 2023 likely addresses concerns raised by activist investors.
During Q4, the company repurchased $115 million of its stock and announced another $500 million in new authorizations.

Credit Suisse: Large Opportunity Ahead

Yelp's guidance through 2023 is likely a bit aggressive, but nevertheless reaffirms the company's large opportunity and potential for margin growth over the years, Ju said in a research report. The company will likely benefit from local advertiser growth, which will become less reliant on sales forces and headcount increases.

Morgan Stanley Needs Proof

Yelp's outlook through 2023 comes with multiple concerns and questions, Nowak said in a research report. The company's guidance implies a material acceleration in revenue growth from an estimated 8-10 percent in 2019 to a mid-teens rate, but doesn't address what is likely a still-low advertising ROI, the analyst said.

It's difficult to project what state the online ad market will be in three years from now, especially up against larger online companies like Facebook, Inc. FB that are competing for the same ad dollars.

Investors may want to "err on the side of conservatism until we see fundamentals improving," Nowak said.

MKM: The Math Behind Management's Outlook

Yelp's management spent most of the time during the conference call discussing recent progress and strategies to generate growth over the years, Sanderson said in a research report. The math behind management's 2023 outlook consists of the following, the analyst said:

CAGR revenue growth of 15 percent: $1.9 billion.
EBITDA of 30-35 percent: $570 million to $665 million.
10 times forward EBITDA = $5.7 billion to $6.6 billion in enterprise value.
$756 million in cash and 86 million shares outstanding: stock price valuation of $75 to $86 by 2022.

Price Action

Yelp shares were down 1.64 percent at $37.83 at the time of publication Thursday.

Photo courtesy of Yelp.

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