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Yelp's Earnings Soar: What Wall Street's Saying
By: Chris Ciaccia
Second quarter earnings from Yelp blew past Wall Street estimates, as the San Francisco-based reviewer of local businesses shows that it's not going to be pushed around by Facebook's Graph Search or other services.
For the second-quarter, Yelp (YELP) lost 1 cent per share on $55 million in revenue, as revenue jumped 69% year-over-year, led by continued strength in active local business accounts. Active local business accounts grew 62% to approximately 51,400 in the same time frame. That was significantly higher than what Wall Street was looking for, showcasing how dominant Yelp is becoming not only in mobile, but in local commerce as well.
Analysts were looking for a loss of 4 cents per share on $53.29 million in revenue, according to those surveyed by Thomson Reuters.
Third quarter and full-year guidance was conservative, but above what Wall Street was thinking. For the third-quarter, Yelp said revenue will be between $58 million and $59 million, with analysts expecting $57 million. For fiscal 2013, Yelp anticipates sales to be in a range of $222 million and $224 million.
With Yelp shares soaring this morning, many analysts on Wall Street took their price targets up, with some even upgrading shares based on the company's future potential. Here's what some of them had to say.
JPMorgan analyst Kaizad Gotla:
"We’re upgrading shares of Yelp from Neutral to Overweight and raising our price target to $52. The recent move in the stock has been significant, but we still think there’s more upside in Yelp shares. 2Q13 results and the 2H13 outlook demonstrate the potential leverage in the model and we think there’s still significant room for strong revenue growth and margin expansion."
Credit Suisse analyst Stephen Ju:
"We maintain our Outperform rating and raise our target price to $56 as Yelp once again surprised with sequential improvement in the conversion rate of claimed to active local business accounts, as well as higher-than-expected ARPU. We believe the 2H guidance remains conservative as it implies sequential compression of ARPU and conversion rate. The results re-affirm our thesis which hinges upon Yelp's 1) minority market share in local advertising which has online penetration of 6.7%, 2) TAM expansion due to the proliferation of connected devices, and 3) further improvement in conversion rate to active local businesses over time."
Jefferies analyst Brian Pitz:
"Yelp put out 2Q13 results which were solid, as strong revenue and EBITDA growth continue to validate the power of the Yelp brand and business model. We reiterate our Buy rating on this stock, with a new PT of $50."
Oppenheimer analyst Jason Helfstein:
"Following better than expected 2Q results and FY guidance, we are raising our estimates and price target. While 2Q revenue growth of 69% y/y was roughly in line with 1Q's 68%, EBITDA margins improved to 14% vs. 7% in 1Q and 5% last year. As a result, we now forecast 2014 EBITDA margins of 20% vs. 17%, previously. Local revenues increased 77% y/y vs. 81% in 1Q, but reflected higher conversion rates and stable pricing. Other revenues +95% y/y, reflecting new partnerships. Now assuming 30% Other growth in 2014. Second-half revenue guidance conservatively assumes slower growth, but mgmt is raising EBITDA guidance by 25%. Increasing target to $49 from $30, but maintaining Perform rating on valuation."