Yelp ( YELP ) is scheduled to report its fourth quarter and full year earnings on Wednesday, February 13. We believe the company could surprise the markets on the upside with account additions, primarily due to the weakness in Q3 stemming from apparently solvable operational issues. Since the investors seem to be relatively pessimistic about Yelp's Q4 commentary and guidance for 2019, we believe the stock has limited room for downside related to this earnings release.
Our interactive dashboard on Yelp's Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.
The company's stock was battered following its Q3 earnings, with a fall of over 20% due to lower than expected account additions and management lowering its guidance. While the reasons for the Q3 miss on revenue and lower customer additions ranged from slower than expected sales head count to technical issues in leads flowing to sales reps, there was no perceptible decline in engagement metrics.
In fact, Q3 2017 had also seen a decline in y-o-y 'Paying Advertising Accounts' growth to 17.4% vs the Q2 rate of 18.4%. In Q3 of 2018, this rate dipped to 25.2% vs. a Q2 rate of 31.1%. Notably, Q4 of 2017 saw the rate go back up to 20.7%.
Yelp's supply side seems to have been impacted due to avoidable operational issues, while the demand side of the company's marketplace has continued to see growth. Going into Q4 earnings, we will be listening in for commentary around the holiday season at the merchant level and pricing performance owning to the company's demand side growth.
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