YELP Reports Q1 Adj. EPS $0.08 vs $(0.16) Est., Sales $158.6M vs $155.6M Est.

Take Profits in Yelp Now, Wait for Management's Guidance

Yelp stock has a history of selling off after earnings. The company reports after the close today.

Aug 9, 2016

Yelp reports second-quarter results after the closing Tuesday. Given the stock's track record of selling off after earnings, including a 10% selloff in the first quarter, it would be a smart move to take profits now and wait for Yelp management to issue guidance.

In the past four quarters, the online consumer review site has averaged a negative earnings surprise of over 300%, according to investment firm Zack's. This measures the difference between what analysts were expecting and what Yelp actually delivered. So, given the company's track record for disappointment, why risk three-month gains of 23%?

What's more, Yelp's stock chart suggests a correction could be around the corner even if the company beats estimates.

Why is that significant? Since that one-day spike on May 6, YELP has left all three key moving averages (20-day, 50-day and 100-day) in the dust. The stock now trades more than 21% above the 100-day (yellow line) average at $25.59. That's a key level to watch after Tuesday's results. Analysts expect a 7-cent loss on $170 million in revenue. It missed by 4 cents in the first quarter. Another miss Tuesday and/or a deceleration in revenue growth could take a 10% to 15% cut in the stock price.

In other words, with more than 100% gains in the past six months, there's too much riding on this quarter to risk on Yelp's stock. Take some gains off the table, put it towards companies that are making money, and see what Yelp says about guidance for the next quarter and fiscal year.

The following results reflect Yelp’s financial performance and key operating metrics for the three months ended March 31, 2017.

First Quarter 2017 Financial Highlights

• Net revenue was $197.3 million in the first quarter of 2017, reflecting 24% growth over the first quarter of 2016.
• GAAP net loss in the first quarter of 2017 was ($4.8) million, or ($0.06) per basic share, compared to a GAAP net loss of ($15.5) million, or ($0.20) per basic share, in the first quarter of 2016.
• Adjusted EBITDA for the first quarter of 2017 was $29.3 million compared to $13.0 million in the first quarter of 2016.
• EBITDA for the first quarter of 2017 was $4.9 million compared to an EBITDA loss of ($6.1) million in the first quarter of 2016.
• Non-GAAP net income was $16.3 million, or $0.19 per diluted share, for the first quarter of 2017, compared to $6.0 million, or $0.08 per diluted share, in the first quarter of 2016.

First Quarter 2017 Revenue Summary

• Advertising revenue totaled $177.0 million, representing 24% growth compared to the first quarter of 2016.
• Transactions revenue totaled $18.1 million, representing 25% growth compared to the first quarter of 2016.
• Other services revenue totaled $2.2 million, representing 107% growth compared to the first quarter of 2016.

First Quarter 2017 Key Business Metrics Highlights

• Cumulative reviews grew 26% year over year to approximately 127 million.
• App Unique Devices grew 22% year over year to approximately 26 million on a monthly average basis1.
• Paying advertising accounts grew 17% year over year to approximately 139,0002.

Yelp plunges more than 25% after outlook falls way short of estimates

May 9, 2017

Shares of Yelp cratered in after-hours trading on Tuesday, after the company said its slower-than-expected revenue growth showed few signs of picking up this year.

The online review company posted an adjusted loss of 6 cents per share on revenue of $197.3 million in the first quarter. The loss was narrower than the 8 cents per share loss expected by a Thomson Reuters consensus estimate — but the revenue fell short of the $198.3 million expected.

Unfortunately, the lower-than-expected revenue is expected to drag on, the company said, forecasting second-quarter revenues of $202 million to $206 million, and full-year revenues of $850 million to $865 million.

That's well below the second quarter estimate of $215 million, and the full-year revenue of $889 million expected by Thomson Reuters consensus.

The company's local advertising accounts, a closely followed barometer of Yelp's business, were 143,000 during the quarter, slightly below the 144,000 analysts expected. Yelp said it plans to retire that metric to emphasize all business accounts.

Paying advertising accounts, which hit 139,000, and the number of devices accessing the Yelp app (26 million) both saw double-digit year-over-year growth.

Despite falling short of Wall Street's predictions, Yelp's revenue in the first quarter was up 24 percent from a year ago, as advertising revenue and transaction revenue both grew over 20 percent from a year ago. The company has also narrowed its losses considerably from last year's 20-cent-per-share loss in the first quarter.

Yelp Users Bemoan Disappearing Recommendations, Adding to Company Troubles

February 13, 2019

. . . .

Yelp is certainly no stranger to complaints on how it manages reviews, but it may now be more vulnerable after switching to flexible, non-term contracts with advertisers last year. The change allows businesses to more easily start and stop advertising. The San Francisco-based company has since experienced a slowdown in sales -- something that it warned will flow into fourth-quarter results, which are due after the market closes Wednesday. Yelp shares were little changed at $38.85 at 1:09 p.m. Wednesday.

Yelp has been struggling after reporting in the third quarter that it added fewer new accounts and cancellations increased. The company gave a forecast for the fourth quarter that missed analysts’ estimates. Its shares dropped as much as 30 percent after the report and they have only partially recovered. Adding to concerns, one of Yelp’s largest investors is threatening a proxy fight if it doesn’t follow recommendations to improve its performance.

Raymond James analyst Justin Patterson said he’d heard about the recommendation purge and that it would be helpful to have some clarity on it from the company. He rates the stock the equivalent of a hold.

A Yelp spokeswoman wouldn’t confirm that the company’s recommendation software underwent a major update.

“The algorithm is constantly learning as it ingests more data,” according to a statement provided by Yelp. “Given the continuous improvement of the recommendation software, it’s possible for reviews to move from ‘not recommended’ to ‘recommended’ and vice versa at any given point.”

Len Raleigh, founder and chief content creator at marketing firm Telapost, looked into the complaints and found that Yelp did change the way which reviews are displayed as “recommended reviews.” After posting an initial article about it in December, he got dozens of emails from people, some of whom said they wanted to pull their advertising on Yelp.

“Any business owner would tell you reviews are extremely important when people are looking up a business,” Raleigh said in an interview. “A lot of consumers will just look at the overall review number when they select a business.”

While many small businesses may still rely on their Yelp presence to build their brand, competition from Google, Facebook Inc. and ANGI Homeservices Inc. may give them an opportunity to shop around.

Aegis Capital Corp. analyst Victor Anthony changed his rating on the stock to sell from buy based on Yelp’s decision to pivot away from locking advertisers into long-term contracts. If the algorithm change is enough to keep some businesses from buying ads, that could eat into overall revenue.

“Local advertisement is their bread and butter,” Anthony said. “That’s how they make their money so they can’t afford to lose it at all, particularly as they go through this business model transition.” About 96 percent of Yelp’s revenue in the first three quarters of 2018 came from local advertising.

When Yelp reports quarterly results, analysts estimate profit, excluding some items, of 36 cents a share. The company has forecast net revenue of $239 million to $243 million in the period. Analysts are expecting $241.2 on average.